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SA’s basic income grant may drive emigration: Study

As higher taxes would be the sole way of raising the money: Intellidex.
Image: Shutterstock

Implementing a basic income grant in South Africa, which has been ranked as the world’s most unequal nation, would slow economic growth and likely lead to the emigration of taxpayers, Intellidex said in a study.

South African President Cyril Ramaphosa and Social Development Minister Lindiwe Zulu have said the measure – which would be the biggest of its kind globally if implemented – should be considered to alleviate poverty. Business organisations have cautioned against it, saying it’s unaffordable.

Borrowing money to finance the payment, which depending on its structure and level could cost anything between R20 billion and R2 trillion a year, is unfeasible given the state of South Africa’s finances, Intellidex said in the July 22 report. That leaves higher taxes as the sole way of raising the money, the group said.

South Africa’s taxes are paid by a relatively small number of people and companies, while its personal and corporate tax rank as the 24th highest out of 118 countries assessed by the OECD. Most of the proposals for a basic income grant would necessitate raising between R50 billion and R100 billion a year, the research group said.

“Some taxpayers may withdraw from the tax system altogether by relocating to jurisdictions where taxes are lower and/or where they feel they may receive a better return on the taxes they pay,” Intellidex said.

“Emigration is a potentially serious threat to the medium- and long-run stability of the tax system.”

Intellidex estimates that personal income tax, the top rate of which is 45% in South Africa, would need to be raised by between 9% and 19% if it was used as the vehicle to raise the funds.

Value added tax would need to be increased by 14% and 29%, meaning an effective increase of about 2 percentage points from its current level of 15%, while corporate tax would need to be increased by between 24% and 47%.

Hiking VAT would be the best option as the level is relatively low by international standards, Intellidex said.

More than half of South African households already get some of welfare payment and the country is ranked as the most unequal, for which data is available by the Thomas Piketty-backed World Inequality Lab.

© 2022 Bloomberg L.P.

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Editing correction :

“ SA’s basic income grant may drive emigration”

Should be

“ SA’s basic income grant may drive immigration”

Let’s go 25% VAT rate to fund the grant.

Between the stupid interest rate increases and a 25% VAT rate we can (pay attention now), properly KILL what was left of the economy.

This is why the socialist redistributive policy is the road the enslavement. The longer the socialists are in power, the larger the inequality and the higher the need for redistributive policies.

This centrally planned effort at social engineering unleashes a myriad of unintended consequences. The socialist policies create victims in the form of unemployment and poverty, and those victims demand compensation. The escalating demands on the redistribution of productive capital accelerate the victim-creating process until the basis of redistribution has been redistributed.

When the tax base has eventually been redistributed, socialism will evolve into fascism and nationalism under an oppressive ruler like a Mussolini, Hitler, Mugabe, Amin, or Stalin. Countless African nations have gone down this road to ruin. The further people drop down Maslow’s Hierarchy of Needs, the more they hide behind the comforting identity politics, and the more they hate foreigners and minority groups. This is the process that has led to the Hollocaust.

We have already witnessed sporadic outbreaks of xenophobia in the townships. If the government expands the social grant scheme while the tax base is shrinking, it will eventually lead to more xenophobic attacks as unemployment and poverty rise and inequality grows.

They need to do the opposite. They have to lower taxes and scrap restrictive labor legislation to grow the economy and create jobs. Job opportunities are the only road to freedom and empowerment. The Tripartite Alliance has in effect nationalized job opportunities for the benefit of overpaid and unproductive Cosatu members.

History has taught us that the first well-intended redistributive steps from a self-serving populist government start the process that leads to oppression and mass murder of those who were initially intended to be beneficiaries of that system. Beware what you vote for.

Let’s (taxpayers) just leave SA and leave the government and grant recipients alone to figure things out between themselves.

We can scream as loud as we like, but as the saying goes, “if you can’t stand the heat, get to of the kitchen”. So expect, as I and many others have been predicting in these comments for years, Zimbabwe 2.0 or civil war between the tribes or just plain French Revolution a la July KZN/Gauteng revisited.

We are those starting to find a way out of this particular kitchen before it all burns down.

End of comments.

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