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I don’t believe in ‘if’ anymore

How hypotheses can cripple national discourse on critical issues.

Swellendam: – It seems to be happening more frequently lately: using hypothetical arguments to silence criticism. One of the better known was President Jacob Zuma’s suggestion that things would have been better if Jan van Riebeeck had not landed in the Cape. Then there are those peculiar defences of executive bonuses despite poor performances based on the hypothesis that things would have been worse if they were not there. And hypotheses become particularly questionable when used as a veiled threat like “without BEE we would have had a bloodbath”. 

Seldom are hypotheses as logical as they appear and even less so do the assumptions that underpin them reflect scientific Newtonian certainty.

So it was with a sense of let down that I saw the technique being used in a vital post budget debate a few days ago, (see Moneyweb report here) featuring a highly respected thought leader and jurist, Judge Dennis Davis, in a spat with another thought leader, economist Mike Schϋssler. The discussion was focused on South Africa’s tax burden, with Schϋssler arguing that we pay a lot of tax and get very little back for it; and Davis countering that this was “profound rubbish” if one considered South Africa as a whole and not only the middle and upper income groups. He then cited a World Bank assessment that South Africa had “the best tax transfer system in the world”.

This assessment has its own context. Apart from experiencing the global problem of massive corporate and other tax avoidance, we have highly efficient tax collection, but being the most redistributive in the world is by no means an accolade, rather a massive indictment. The level of redistribution is never a measure of government success, rather a failure to create the conditions in which people are able to care for themselves. All governments are “redistributive” to some extent, but that extent should be restricted to a minimum.

If “best” means most efficient, then there could be an avalanche of counter arguments. The transactional efficiency of a tax currency is notoriously difficult to measure. In the first instance real measurable value can only be determined in legitimate transaction which means freedom of choice, free moving prices, and alternative suppliers, all of which are absent in government transactions with the electorate. In the second instance, the tangible value of the government’s offering is extremely difficult to measure at the recipient level. Even more difficult is determining the net value after costs of not only collection, but administration and bureaucracy.

So Judge Davis reverted to hypothesis in his assessment of tangible value. He said: “In effect the tax and transfer system has created quite a lot of stability which otherwise wouldn’t be there. Of course it doesn’t go to you (middle and upper income South Africans) but that’s the legacy of apartheid I’m sorry to tell you.” He added: “If the tax and transfer system was to be fiddled with and it failed as a result, political instability could become unbearable.”

So to paraphrase one interpretation: accept the system or face dire consequences.

But to add another equally important hypothesis: the critical yet immeasurable extent to which our highly redistributive government has exacerbated expectations beyond reality and affordability, creating a perhaps even greater threat to national stability.

Even if we accept that the South African government has to be more redistributive than any other in the world, then the question can still be asked whether the beneficiaries of this redistribution are getting value for the money others are paying for. This is the real issue – one that was clearly missed in a facile relapse into rhetoric. The civil turmoil Judge Davis warns about is already upon us – not because of a shortage of tax-payers’ money to avert it, but mostly because of a failure of government at all levels to do what it is supposed to do with it.

That is not a separate discussion and it is the essence of what irks the average taxpayer and causing extreme frustration on all sides of the income divide. It explains in large measure why South Africa has one of the lowest levels in the world of trust in government among the informed public (17%). So here are a few hypothesis of my own: How much better off would the beneficiaries of tax-payers’ revenue be if:

  • The some R60 billion in maladministration and corruption annually was spent properly? (It is more than double what the Minister of Finance had to find in extra revenue);
  • The R250 million spent on Nkandla had been directed to the poor;
  • The public service was streamlined to ensure that salaries were far less than the current 12% of GDP, the 6th highest in the world;

And so one could go on. But as we know, the fish rots from the head and something I wrote in a previous article deserves repeating here: The supreme example of an utterly cavalier view of taxpayer’s money is the State President himself. He has surrounded himself with a cabinet of 35 – one of the largest in the world – bigger by far than the United States (16) and China (25), and each costing about R4 million a year. Cut that by half (both the number and their pay) and by sheer example alone you will suppress waste substantially, diverting more to where it is most needed.

Any discussion on the collection and allocation of tax revenue has to start here. It is less about what you have, but more about how effectively you spend it. That is ultimately far more relevant to social stability.

But to return to the main issue: the older (and hopefully wiser) one gets, one learns to appreciate the absolute futility of trying to live a life based on “if”, “if only”, “could of”, “would of” and “should of”. Let’s not muddy discourse with their random use.

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COMMENTS   11

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Davis clearly wants to spin the real story so that we must all feel comfortable supporting the country with our taxes. However, he misses the point again as so clearly set out above. Perhaps Davis would do better to focus on his work at the Supreme Court

I see I am also illphil. New web site glitch will post when my name comes up sorry to hijack your thread 1llphil

Davies is also one of the beneficiary of the system, he is paid extremely well by the taxpayers. I wonder what would happen if civil servants salary would be tied to the per capita GDP of the country? In SA the salaries earned by government employees is way higher than the average income of the workers in the private industry and probably a magnitude above the per capita GDP.

Hi there peter gordon grant. I have now been told on 3 separate attempts this morning that I will post under the names of Sygnia, Riaan and (this one) The Hun. Sorry Hun, but I can find no other way of pointing this out to MW. I know they are still upgrading and debugging the site, but this does seem to be a major problem – file pointers / bookmarks possibly????. There seems to be no way of replying to a comment, nor any way to vote (though this article has 2 or 3 votes already and the one about TFSA’s has about 10 – how do they get there. The little thumbs up icon does not act like a handle nor does the “report”. I have made these points on the “welcome to MW Beta” article, but nothing happens. I think they need a FAQ section. Also when I try to login it tells me that I amd trying to logout. I’m about to start tearing my hair out.

Yep …. Judge Davis would be best advised to stick to the law courts. Even internationally rated economists struggle to agree on the flow of funds from tax payer to government and back again into society.

Another “if” could be “if the ANC didn’t get rid of the white teachers, administrators, academics and mature professionals through weighted BEE programmes, would the average South African be better off?”

Hi again peter gordon grant. You will see that your previous comment garnered 121 votes!!!! In frustration at not being able to vote (or so I thought) , I hit the thumbs up icon about 100 times and lo and behold you got lucky! Come on MW, these are basic errors, like being unable to reply except by making a new comment. Disqus was far better. And how was I able to login without having previously logged out.

Fantastic article. No mud slinging just the truth…

MW are showing my full name – why is this happening? Please can we go back to Disqus as the new system has clearly not been tested before going live. I would be more than happy to assist in testing having been a business analyst and computer system tester for many years before I retired.

There’s absolutely NOTHING in return for paying tax, it just goes into a hole with ever increasing number of dependants.
> I have to provide for my own medical & then still get tax on my employer’s contribution, VAT’ed at the Dr & for medication;
> Provide for my own pension & then get taxed on it when it eventually pays out;
> Provide for my own security + VAT & when robbed/hijacked/attacked pay VAT on replaced goods, Dr & medication & more security;
> Pay tax (via tolls) to go to work in order for more taxes to be taken;
> Taxed on investing in SA, whist taking all the risk, they take another 10% & 15% on dividends for doing absolutely nothing! So what is this judge talking about whilst simultaneously the tax payer also pays for his existence.

Thanks to all the 954 people who voted for my last comment. Pity MW used my full name, but I suppose we have to live with errors like this, as MW has not taken any action on the myriad of problems on the new “comments” section. Another one is that you can’t “unvote”. And there’s no limit to the number of votes (all positive) you can make!

End of comments.

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