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Warming up for a taxpayer shakedown

When government wants to take more, it mentions the poor – but does not admit any responsibility for poverty or suffering.

When the honourable minister of finance delivered his Medium-Term Budget Policy Statement (MTBPS) on Wednesday, he ‘opened the debate’.

But where are the arguments?

Surely this was nothing more than a long-winded slam-dunk statement, forewarning the ill-fated taxpayer of bad tidings?

Tito Mboweni must have struggled to find an allegory to portray the last ten years, so he chose a harmless little aloe when presenting his annual budget speech in February – and brought it back on Wednesday. It had survived a long winter. But that was not necessary. He could have chosen any zombie state-owned enterprise (SOE), and the only offended parties would have been those corrupt cadres who have over the last decade sucked all the sap out of them.

When the government wants to take more money from taxpayers, mention is made of the poor. But not the poor who have suffered corruption at the hands of state officials (remember the irregular expenditure of about R1 billion incurred by the South African Social Security Agency?). Not the poor who have to suffer the state-owned hospitals, nor the lousy outcomes-based educational system. The government does not claim any responsibility for any poverty or suffering.

‘Solution’

Mboweni’s solution for assisting the poor, curtailing the increasing national debt, diminishing the excess of expenditure over income, righting the ailing economy, and preventing the ongoing xenophobia is to shake the flipping baobab tree.

Perhaps our honourable minister ran out of nerve to say he plans to shake down the taxpayer like a rat.

As for the National Development Plan, where is the new life? Where are the new industries that have sprouted, generating an increase in employment, and thereby new revenue to tax? This is still just talk, right?

And as to the Independent Communications Authority of South Africa (Icasa) “accelerating” the licensing of high-demand broadband spectrum licensing, sadly Icasa is drowning under the weight of responses to its latest badly-thought-out draft regulation on transforming the telecommunications sector.

South Africans do not need a “reimagined industrial strategy”.

We need proper governance, laws that are implemented, honest government officials, a reliable power supply, safety and security, streamlined processes to enable the fast registration of businesses and the obtaining of necessary licences, and a police force we can trust.

Accountability

We need to hold state officials to account. Put corrupt officials in jail, not offer them employment in another SOE. Government must put an end to cadres expecting payback, and should spend more time worrying about the unemployed youth who face a bleak future. Government should stop interfering in businesses and sectors of which they have no knowledge.

‘Reorganising’ Eskom and other SOEs does not cut it. Government must stop the leakage, the continuous bleed. It would cost the government less to place the employees of culled SOEs on permanent pension.

As for the inept executives earning salaries they would never get in the private sector, they should simply be fired.

Sars Commissioner Edward Kieswetter may have reinstated the Large Business Centre, but it is a hollow shell of what it once was. It will take at least three years to attract skilled staff and create a pipeline of large complex income tax cases that will result in additional tax.

Staffing up the customs, Vat and payroll audit functions will result in more immediate wins.

It is unlikely that Sars will be able to meet its target over the next few years. This means government will have to raise additional taxes from the diminishing pool of taxpayers. Or use other means to raise funds (toll roads and fuel levies), which have a devastating impact on the poor.

‘We must’ – then why don’t you?

Mboweni’s comment that “We must also wean state-owned companies off the national budget. They must also stand on their own feet” shows ignorance of the many SOEs (and funds) that don’t earn income and receive government grants – Brand South Africa as an example. What is to be done about these? Will they be culled?

Mboweni is likely to rue his words that the South African government is subsidising “wealthy bond holders” when the country is downgraded and these “wealthy bond holders” dump those bonds.

Taxpayers deserve to know the total cost of the some 1 000 SOEs and state-owned funds. It is unlikely that the minister has any idea.

The government can immediately cut costs by halving the boards of directors of every SOE. There isn’t one SOE that should be paying bonuses.

Before the government decides to raise taxes, it should consider which entities should be culled. Let us have a debate about this.

It is impossible to hold a debate without knowing the facts. The government should provide some. The public may come up with better ideas to cut costs and wastage.

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I have just returned from a Vietnam tour of 3 weeks . A country that was demolished till 1975. Unemployment is <2% . Their economy thrives on small business entrepeneurs who operate in areas of less than 10m2 .
Vietnam GDP per capita is $2525 and SA $6509 with VAT @ 10% . The point is that they are earning and income because there is liitle red tape and more important… the people are very happy .
Tourism is HUGE !! I met people from Russia, Poland, Israle, Germany , France . And it is cheap andver safe to travel.

The difference between SA and Vietnam ? The people have the right attitude .They want to work… they have forgiven America and the country is at peace . Time for our ministers to go and see for themselves . Economy class plane tickets and hotels are the way to go Pres Ramaposa.

Reading this piece is a de jevu to the melt down of Zimbabwe.

The only response to economic stagnancy by the Zimbabwe government pre 2000 was increased taxes, levies and license fees. Today the tax base of individuals is virtually non existent.

Thousands of small businesses closed and the country has returned to a subsistence state. A total lack of services, broken infrastructure and failure to deliver even the most basic essentials such as water and electricity. Where did the Zimbabwe government look when the poor rose to protest – the LAND. The rest is recent history.

My family farm was a state of art horticultural export business bringing in revenue of $US15 million annually. It employed 3500 on farm. This was not enough to stop our eviction and subsequent looting of a thriving enterprise. Today it stands derelict and unproductive.

This is an analogy for what I see the future of South Africa unless this confederacy of corruption ends. The biggest problem must South African have is a lack of understanding as to how bad things can really get – just ask any one of the 3 million undocumented foreigners, they all have a story. Ironically these foreigners transfer over US$4 million back to Zimbabwe to support family dependents – and yes they are taxed on bank transfers in Zimbabwe, as are the recipients when they receive local and worthless bond note equivalents.

Welcome to the future.

Seems that is something the ANC and EFF aspire to become so the future looks rather bleak.

Barbara
You would think that the ANC would be the experts on why African countries fail and what not to do but it is seems that when you are consumed with racial hatred one cannot learn anything and are doomed to repeat the mistakes of the past.

@Barbara…thanks for your valuable insight

So pray tell us, hopefully with your wisdom and having lived through government robbery first hand, how you are protecting your hard earned money so that you don’t experience this ‘de jevu'[sic ] all over again ?

Very tough one Barbara. Bottom line for the ZANU PF and ANC was pure venal, self interested greed. Both were willing to do anything to stay in power as long as the elite could continue stealing and looting for personal gain. The country and the people, screw them, the ZANU PF and ANC elites didn’t struggle to be poor.

BUT, that being said, we should also be realistic:

Right now the jobless millions might be hungry sometimes,
but the at-least-we-are-free-feeling is pulling them thru.

As for the people with cars, houses, jobs, food etc,
we need to realize we ARE PART of a corrupt system,
even while we are not corrupt ourselves.

Major attitude change will only take place once we have hit rock-bottom,
and as you suggested (intentionally?) Chalky, or implied, only a (civil) war would do that for us.

@mj stellenbosch…..Chalky never implied [civil] war…!

And believe me, that is the last thing you would want….a civil war here would never lead to anything positive – all that would transpire is a never ending state of attrition…..think Somalia…Sudan…Liberia..Algeria..Ethiopia…etc

With the many factions…tribes..races..ethnics..nationalities…illegals…foreigners etc here…one would turn on the other…when one tribe has decimated another, so they set on the next one, and eventually it becomes a blurring of the lines devolving to a perpetual state of conflict

Just like a knife fight, no winners…only survivors

In fact, its up to the minority, to try and keep it all together

Get rid of the minority, and it all collapses for sure

Nevertheless, Vietnamese are killing themselves to get in the UK, so the picture can’t be all that rosy.

@Dr Gonzo….no they not……that Asian sector[ Vietnam/Thailand ] forms the smallest minority of immigrants overall

In fact, Thailand often tops the happiest country to live in

Given the choice of: the overpopulated/mass immigration/property bubbled/expensive/PC correct/freedom stifling place called UK,…. or Thailand, I know which one I would pick in a heartbeat

@drgonzo…lol… that is stereotyping

…plus the right CULTURE and WORK ETHICS for sure 😉

The americans left. You didn’t. You just left your bills for your kids to pay. Small difference.

Dear Chalky

I posted a considered reply to your comment, the essence of which was that one cannot compare the Far East, which includes Vietnam, with Africa as one has to compare apples with apples; that the Far East developed a highly sophisticated society commercially, academically and culturally thousands of years ago and Africa is only at the beginning of that phase, held back by the hubris of the patriarchal, tribal mindset which will not accept it and nor will they accept well-meant mentorship.

One only has to compare the creation of the Great Wall and a large army of Terracotta Warriors from the Qin Dynasty period – 221 to 206 BC- with current African products. No African state has built a national railway system on its own as far as I am aware.

The Moneyweb monitor decided that this was beyond the pale and declined to publish it. Perhaps I will have more success here but if not I will be considering my Moneyweb subscription.

@Beachcomber….yup, also noticed MW’s censorship tyrants in full throttle here – often times they are now EDITING my replies to suit their narrative ??

Seems like ‘freedom of the press’ is fast becoming a pipe dream here in SA [ possibly its true that we are heading to a communist state after all, as evidenced here too ]

Lets see if this one passes the MW censorship police today – if not, it confirms my worst fears

south africa has way too much greed,corruption and other crimes from apartheid instilled in tits culture and character.

I bet they are not killing their rice farmers on an industrial scale??

A Well-argued and rational article that makes one get emotional about government.

If the ANC actually cared about the poor it would abdicate in favour of nonpolitical professionals to run the turnaround of SA Inc.

I cringe almost every but not each time I hear or see a minister or DG or spokesperson opine on a technical topic.

Populism will not save this ship.

Unfortunately the DA debacle has proven that all politicians are egotistical fools. The Nats were, the ANC and DA are.

I am not saying corporate is great. The absurdity of the hired help salaries tells me that a R20m CEO would have done very very well as a career politician / influencer.

But there are probably enough self-made (not hired help types) competent wealthy (unbribeable) individuals of all colors to fix things if given free reign with the top academics.

Yes I know it is not going to happen…

Prediction Engine on tax:

A one-off wealth tax on net asset value of individuals and especially trusts and companies at a sliding scale.
First 5m zero,
Next 5m 1%
Next 10m 2%
Next 50m 3%
Etc etc to a max of 10%

The logic is that the proceeds are to be used exclusively for investment and debt reduction, not current expenditure. A bit like the norwegian sovereign wealth fund.

Nobody believes it will be a “one-off” but hey if it helps you sleep better

We already have multiple levels of wealth taxes. The redistributive municipal rates and taxes regime expropriates your equity and redistributes it in the squatter camp. Estate duties take 20% to 25% of your assets, plus 18% CGT because the asset has to be sold in order to pay the estate duties. The reality is that the government already reaps all the benefits from our assets, we are merely managing, renovating, insuring and protecting it for the benefit of the government. We are unpaid security guards for government’s assets. We work for the government without any compensation. We are the slaves to a socialist government. Can expropriation of assets be worse than what we have at the moment? Expropriation or bankruptcy, whatever comes first, will set us free.

As usual well said Sensei. Extra stupid is that CGT in SA is really just inflation tax. Simple exercise. Put cash into US$ at zero interest (earning zero) put it back to ZAR after 5 years, are you eligible for CGT on the 25% (guess) change? Absolute ripoff, proudly brought to you by the ANC..

Mr Kearney, the gain is first calculated in USD and then converted to rand. The USD gain is 0.

But yes, in the absence of indexation it is an inflation tax. Supposedly the inclusion rate compensates for the lack of indexation, we’ll see how long that lasts.

@ Sensei..well done again….you summed this up so well….and you only scratched the surface !

I could mention a myriad of other ways government is robbing you day by day [ I havent even gone into personal liberties/rights etc too which no one is seeing either ]

When I mention this same viewpoint in public I get a lot of quizzical stares or slack jaw responses

Regardless, right now, judging the current status quo the reality is our government is at war with us

Period.

Its not even a disclosed secret anymore – the government is OPENLY declaring their intent…its in front of you [ esp you !, the ‘minority’, …..even though EVERYONE will be the poorer for it in the end ]

But unfortunately most suffer from cognitive dissonance – they cant accept that one morning govt has frozen your bank acc…taken your property….prescribed your assets…..

Well, just ask the good people in Greece….Zim…..Venz…etc

But…but….it can’t happen…..it can’t be !??

Right.

All the while, the smart money is piling into the last safe haven totally untouchable by banks…govt…tax man….debt collectors etc

And sorry, if you don’t know what that is by now, and put the time and research to red pill yourself to get out your comfort zone, then you only have yourself to blame when the proverbial shtf my piglets

Sensei: I am not proposing, I am predicting 😉

Right now we are private asset rich, but income poor. Hence…

On the bright side, this will reduce one’s estate duty :/

Slight correction. I don’t think they distribute anything in the squatter camp. It’s all creamed off the top

You NAV is probably 4 999 999 ?

It will be, if the wealth tax starts at R5m.

@cheetah58….he he !…..on the button !

I’m afraid this budget speech did nothing to instill a sense of trust . Trust between taxpayer and state . Once this is broken the tax revolt follows . You won’t see it though . A tax revolt comes like a thief in the night . Every effort is made to circumvent the state . Even reducing big capital spends to avoid excessive VAT pmts ! You can increase taxes but you will NEVER collect more when you not trusted !

A lack of TRUST REDUCES TAX COLLECTIONS !

When the trust relationship is broken, between employer and employee, it is grounds for dismissal. We employ the Government.
We don’t trust the Government, they should be dismissed.

Unfortunately, we, the taxpayers, do not employ them, we merely pay their excessive salaries and benefits. They are employed by the millions of people sponging of the various state grants and free everything.

Yeah, remember what happened last time you forgot the democracy thing? Seriously? What kind of intelligence proposes something so child-like? Stick to farming.

Its not as if people need to revolt. There is often just no incentive to invest. And among the disincentives are high tax rates. Municipal rates and taxes and property investments as an example.

@Andrew…totally agreed !!

The party is over, and the few minority left are declaring hangover on those in power !

Agree. Plus all the SA Inc corporations that bought foreign business in the name of “diversification for growth”….just a disguised way of getting huge amounts of accumulated capital OUT of SA. (whether it ends up profitable on the other side, is merely a bonus.) I think there’s plenty of behind the scenes negotiations to buy offshore businesses at inflated prices (with the remainder going to “no questions asked”).
Skills at SARS’s Transfer Pricing unit was decimated during Moyane’s rule, and local auditing firms’ abilities to consistently pick up corporate fraud, has taken a dent #KPMG

The problem with ever increasing taxes, is that eventually you get negative payback. Perhaps were are there already: last year we had increased tax rates and VAT rate, and the payback has been miniscule at best!
There are simply so few choices left, but you HAVE to cut expenditure. We know that will not be popular, but please do the right thing.
We the citizens, haves and have-nots, cannot go like this.

@Fourstars…what you are trying to refer to, is called ‘The Laffer Curve’

And stop pleading, the govt doesnt give a ****

That’s the problem – the minority is too altruistic…nice…patient….benevolent

We have in effect become doormats for government

Nice !

Socialist policies drive a negative feedback loop in the economy. The higher tax rate that has to compensate for the lower tax base that results from the shrinking economy, leads to capital flight, a brain-drain, E-toll riots, and a shrinking economy. This is the death-spiral that results from a stalled economy after socialist policies cut the fuel lines that feeds growth.

We still have altitude at the moment, we are gliding, the wing is dipping, but we can recover. We need to put the economy in the nose-down position to gain lift. We have to abandon BEE, cadre-deployment, AA and privatise all SOE’s and municipal services. If we keep on pulling back at the stick, the crash is imminent.

Well it wont be getting better any time soon.

As in, not in our lifetimes.

This is Africa. Fix is not in their vocabulary. Unless they are going to “fix” you politically.

Nice article Barbs. One of your best offerings yet. Be that what it may, one can be sure of one thing. There is a correct way of fixing this debacle and a wrong populist way. The only way forward is to make South Africa a low tax capital and business haven which will involve cutting state expenditure and borrowing. Some suggestions above involve state sponsored theft of assets. This will most certainly exacerbate capital flight. The last thing you want.

We can be sure that whatever the ANC do will make things worse. They will do the wrong thing to maximise short term gain to retain power and in doing so push the country over the cliff.

Is it only me or is there a thinly-veiled undercurrent of contempt flowing through this article? I admire the author´s tremendous self-restraint as she laments the hopeless antics of this idiot farm.

The Greek philosopher Socrates controversially declared that all vice is the result of ignorance.

Gathering knowledge will prevent mistakes and deliberate offences.

Applying this philosophy one must conclude that the ANC knows nothing whatsoever.

The ANC have the same wisdom and ability of the primordial sludge.

We’ll likely see introduction of “prescribed assets” sooner than anticipated, as opposed to too drastic increases in Income Tax right now.

(“PA” is less obtrusive and stealthier for the state to dig into everyone’s life savings, than to cause a tax outcry right now.)

I think come 2020 Budget, the Indiv Income Tax rates may (again) not be adjusted for inflation (higher tax through stealth….but the BIG ONE that can’t be missed is SA’s R6-trillion retirement savings pot)

That folks, is the easier way out of govt 🙁

@MichaelfromKlerksdorp……good point !

However, enforcing ‘PA’ will not go down well either, as imagine how this negatively affects all the massive institutional investors here !

PA will steal their lunch, and these are big boys who will not take it lying down

So,in effect, 2020 Budget is stuck between a rock and a hard place.

Dear Barbara

If you have a religious persuasion or belief system of some form, may I suggest that you and all the other furious commentators here go down on your collective knees and pray for our economic survival?

Because that’s the only resort left to us …

The SS RSA is a ship veering down, at first slowly, but now faster so than ever ever before, accelerating towards an iceberg. The Captain of the ship is drunk and the rudder broken. What shall we do with the drunken sailor?

Read Sake Rapport, 3 Nov, on what is likely to happen to tax in the Feb budget. Also, bow Mboweni sugar-coated and massaged certain critical numbers relating to SAPS, education and actual extent of bailouts to SAA, etc, in his mini-budget last week.
Clearly, plans to increase tax (in WHATEVER form) next year against THIS background is looking for trouble….

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