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Manuel has no room to manoeuvre

27 January 2009 Gareth Stokes

“More woe as 72 500 jobs axed in one day!” screams the headline in this morning’s Financial Times. In a now familiar lament the daily newspaper outlines how companies across a range of sectors plan to weather the current global recession. Against the backdrop of falling demand the only option available to financial strategists is to axe workers. Yesterday Caterpillar (20 000), Pfizer (19 000), Sprint Nextel (8 000), Home Depot (7 000), ING (7 000), Philips (6 000), Corus (3 500) and General Motors (2 000) did just that.

What does this mean for South Africa? Trade union Solidarity warned last year that the domestic economy could shed more than 300 000 jobs, so we already know that unemployment is on the rise. But there are other implications too. Although finance minister Trevor Manuel remains upbeat about prospects for the domestic economy – Treasury expects GDP growth of 1% for the current year – other economists strongly disagree. And that means government’s collection mechanism will have to be tweaked to fund the country’s aggressive social spending plans.

No ‘tax break’ at the coming budget speech

Economist at the Efficient Group, Dawie Roodt, reckons the 2008/2009 revenue collection will be missed by approximately R8bn, despite personal income taxpayers and companies contributing more than budgeted. This means government will only have R616bn of its expected R625bn to play with.

For the 2009/2010 year it will be even worse. Recession is going to bite into a big slice of the tax collection net. There are concerns that job losses due to the economic slowdown will eat into the additional revenues collected due to wage settlements. And the contribution through company tax and VAT will definitely decline under tougher economic conditions. The revenue collection party that resulted in SARS overshooting their collection targets for a number of years is a thing of the past!

What does this mean for ordinary taxpayers like you and me? Billy Joubert, tax director at Deloitte told the Business Report that a tax increase for 2009/2010 is unlikely; but warned that the “tax bracket adjustment won’t be as generous this year as in the past! The only way for SARS to collect more revenue is to ensure collection from every potential source. Are they doing the job at the moment?

The numbers don’t make sense

These days you cannot look at a set of statistics without wondering about the accuracy of the data. SARS is no different. According to them there were 5.2 million individual taxpayers registered in South Africa for the 2008/2009 year. If only a quarter of South Africa’s 49 million people were employed you’d expect that number to be closer to the 10 million mark. Has SARS spread its net wide enough? We took a look at the Quarterly Labour Force Survey (QLFS) for Q3 2008 to obtain a clearer picture.

According to Statistics South Africa the pool of available labour in the country comprises some 30.8 million South Africans between the ages of 15 and 64. Using this number – and after applying a range of definitions and filters to produce the most palatable number possible – they conclude there are 17.8 million people willing and able to work. If we strip out the official 23% unemployed we’re left with just more than 13.655m employed individuals. After allowing for the almost 3 million people employed in the informal and agriculture sectors (on the assumption that many in these categories earn too little to pay tax) we’re still left with 10 million potential taxpayers. And these numbers don’t even include the hundreds of thousands of registered taxpayers over the age of 65.

In summary, we cannot accept that salaries are so poor that more than half of the formally employed population falls outside the tax net. Cleary SARS can extend its reach further in coming years – and boost state coffers by making the tax system more efficient rather than hiking taxes.

Editor’s thoughts:
It’s extremely difficult to structure an equitable system of taxation in a country where so many people are unemployed. The rich do everything in their power to avoid tax – the poor don’t have spare capacity to pay – and the so-called middle class is left shouldering more than a fair share of the burden. Do you think SARS has done enough to ensure that all South Africans contribute their share to state coffers? Add your comments below, or send them to


Added by Niel, 27 Jan 2009
SARS can definitely spread it's wings. A few places to start would be the taxi operators (I know this has been suggested in the past) and even though the amount will be relatively small, one Jacob Zuma. Having read about his legal bills that are being paid for by us the taxpayers, that would surely be a fringe benefit in JZ's hands even though he is not 'employed' by the state. Then there is the donations tax that could be collected from the Friends of Jacob Zuma Trust if any fees are paid for from there. Would government even consider these avenues for tax collection? Only thing to worry about is Julius and Blade calling this a political conspiracy too. But what do we really have to lose here? Us middle-income earners would be asked to pay even more so spare us some pain Mr Manuel and make them all pay their dues.
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Added by Giel, 27 Jan 2009
Would somebody please explain to me what became of the tremendous surplusses SARS boasted about in the past few years. It is incredible that SARS is yapping at the heels of ordinary citizens once again. Ordinary citicens are already working an extra ordinary number of days per year to fill the coffers of SARS and then they get very little back. They must still pay for their own protection, childrens education, university education, etc, etc, etc ad infinitum. It seems that serfdom is back in a new guise
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Added by Bass, 27 Jan 2009
It is certainly a concern that SARS is considering preying on what seems traditionally to be the "easy targets" - working middle class and registered businesses. Based on the statistics quoted above, SARS, however pro-actvie and professional they have become in recent years, is still not as effective as what they should be. The fringe benefit taxation of aid Zuma is receiving to stage his court defence is an interesting one which I agree with fully - a perfect example of SARS spreading their wings. Conversely it is sad that in such a case, he will pay tax on monies recieved from taxpayers - sounds crazy to me! It seems as if the old cliche continues to apply - the rich getting richer, the poor getting poorer and the middle class (what's left of it) carries the can.
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