Pointers for Pravin

Gareth Stokes, FAnews Online Editor

One of the things ex-Finance Minister Trevor Manuel introduced during his marathon 13-year run at the helm of National Treasury was an invitation to ordinary citizens to share their ideas for the National Budget. He incorporated some of these “tips for Trevor” in the annual presentation to Parliament. It was a hit on two fronts because it provided Joe & Jane average a sense of empowerment and assisted Manuel in injecting some humour in what typically is a long and monotonous speech.

On 23 February 2011 Manuel’s replacement, Pravin Gordhan, will make his second trip to the podium to present the 2011/12 National Budget. He also wants to hear from ordinary South Africans with the following invitation prominently displayed at the National Treasury website (http://http://www.treasury.gov.za/): The Minister of Finance would like to hear your thoughts, ideas and tips for the 2011 budget. We’ll call them “pointers for Pravin” and add some of ours below...

Can we make it simpler – please!

A while back we attended a media presentation on the findings of the PwC Family Business Survey 2010/11. During the proceedings, Andries Brink, national leader: Private Company Services for PwC Southern Africa, drew our attention to a recent PwC tax compliance survey which concluded a mid-size UK company spends approximately 110 hours per annum to comply with all its tax requirements, while the same level of compliance demands 200 hours from a similar size South African company. Our first “pointer for Pravin” is to massively simplify the country’s tax regulation.

Instead of reviewing, amending and adding to tax laws each year Treasury, with the South African Revenue Services, need to reduce the onerous requirements placed on both companies and individuals. I dread tax season – not because I object to paying my fair share – but due to the fact I haven’t got enough time to trawl through reams of paperwork each time I submit my IT12. Don’t think the individual doing your taxes for R1500/year has had the time to cover all the required legislation either!

A quick visit to http://www.sars.gov.za/ suggests an ordinary citizen may spend a lifetime reading documents and updates and still not have a clue what’s going on. A case in point is SARS’ ridiculous 761-page Comprehensive Guide to Capital Gains Tax. Imaging trawling through this document to “familiarise” yourself with this particular tax – incidentally just one of 20 “tax types” referred to on the site. I reckon SARS should scrap all the side shows and focus on a core of taxes including income tax (private and company), estate duty and VAT. I’ll even let Gordhan keep the fuel levy if he promises to clean up the messy organisations funded from that revenue stream. Incidentally, there are some extremists who reckon an economy could function with VAT as the only tax!

Don’t forget the other taxes you’re throwing at us

As Gordhan sits down to decide where to find the extra revenue needed to fuel the welfare monster the ruling African National Congress has nurtured, I would urge him to consider the non-SARS taxes we’re already paying. South Africa’s 5.9 million registered individual taxpayers have to contend with inflation-plus increases for municipal rates and services each year. And we get kind of “double taxed” because these increase are inevitably accompanied by a further slide in service delivery.

I’d also urge Gordhan not to forget about the additional taxes we’re being charged to use assets we paid for in the first place. It seems bizarre government will place national assets (such as Gauteng’s motorways) in the hands of a private company, allow them to spruce the roads up a bit, and then charge us to continue using them. It’s daylight robbery!

Take a bit more (VAT)

Service delivery aspects aside, I don’t think too many individual taxpayers can complain about the current tax burden. I’m quite happy with the top marginal rate (40%) for income tax kicking in at the mid-R500 000 per annum salary. But I’m not happy to contribute thousands of rand each year when I read about corruption, tender rigging and pointless expenditure on a daily basis. Take the R100 million the National Youth Development Agency (a job front for connected ANC juniors if ever there was one) spent on the 17^th World Festival of Youth recently. The event can be offered up as a case study of everything wrong with state (and state-related) expenditure in modern day South Africa. Bottom line: There was absolutely no need for the NYDA to host the function!

I have two parting “pointers for Pravin”. The first: Don’t fund it if you can’t provide it… I’m talking here about the proposed National Health Insurance system. I would be horrified if government announced funding plans – by way of additional taxes – for a system which they have no hope of successfully implementing. And second: Hike the VAT rate from the 14% to 17.5%. VAT is a tax contributed by all South Africans – and I don’t think the critics’ arguments against such a tax hike hold much water. I think the economy can easily absorb an increase in VAT, provided it goes hand in hand with a sensible zero rating on essential goods to protect the poor!

Editor’s thoughts: The best way to create resistance to an idea is to offer up something unpopular – and hiking VAT is just that. But you shouldn’t dismiss it without thinking about it first. A family spending R5000/month on groceries will only have to stump up an extra R175 in VAT. And although you’ll pay much more for big ticket items (R3500 per R100k you spend on your motor car) such purchases are inevitably repaid over longer periods of time... Would you be prepared to pay VAT at 17.5%? Add your comment below, or send it to gareth@fanews.co.za