Increasing tax base

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Jack Welles
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Re: Increasing tax base

Unread post by Jack Welles » Fri Oct 04, 2019 6:59 pm

Whirly wrote:
Fri Oct 04, 2019 3:04 pm
How much extra sales tax was generated with the 1% increase in VAT from the 1st of April 2018 and how much for the 2019/20 tax year? :?
Sugar tax added R2.3bn in 2019 and R83bn came from fuel levies. Whirly.
If I've got my zeros right ( 8-[ ) VAT @ 15% represents +-25% of the +-R1,2 trillion, thus equals +-R300 b. So 1% = +- R20 b. So the total of that with the amounts you mentioned = +-R100 b, not the additional R1,2 trillion needed to generate the extra tax to employ the workers in the first place.

So you can see that the numbers just don't add up for govt to be the only employer hiring workers. It's an illogical circular argument. That's all this thread was about. This thread was never meant to be about the economy (the pits), unemployment (awful), corruption (scary bad), SOE's (should be privatised or closed) etc etc etc.

It was just about the claim that the extra +-R0,3 trillion tax over the period was coming because the govt had hired the extra workers. That's almost as stupid as claiming that SA has more Govt employees (+-2.1 million) than the USA (22 million), ie, +-10% of the size. It should be smaller but it certainly isn't bigger! :shock:
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Re: Increasing tax base

Unread post by Whirly » Fri Oct 04, 2019 8:26 pm

I was not disagreeing with you Jack.

There are some other numbers, like Customs and excise tax and a large number classified only as "other", how that is made up is unknown to me.

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Re: Increasing tax base

Unread post by Jack Welles » Sat Oct 05, 2019 10:09 am

Whirly wrote:
Fri Oct 04, 2019 8:26 pm
I was not disagreeing with you Jack. There are some other numbers, like Customs and excise tax and a large number classified only as "other", how that is made up is unknown to me. Whirly.
:smt023 Fair enough. IIRC those other bits do add something but not generally a large amount. The two biggies are income tax and VAT. However, I'm sure that we can all agree on something in that the govt employs too many people.
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Re: Increasing tax base

Unread post by Whirly » Sat Oct 05, 2019 1:02 pm

Jack,

I did give the extra money coming from income tax (R15bn) and the fuel levy, you calculated the extra VAT but it seems we are still R200bn short! :?

One thing we all agree on is that Government and basically all SOEs are over staffed. Seems like only the watchdogs are under staffed. NPA, PP and the like.

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Re: Increasing tax base

Unread post by C Africa » Sun Oct 06, 2019 7:21 pm

Alright, sorry I was off-line for a few days. Since I was the one who started this furore by my comment in the emigration fred, let me clarify:

The news 24 article contained the following statement:

Documents indicate an increase in gross tax revenue every year from R1.07-trillion in 2015 to R1.29-trillion in 2019, at roughly 7% per annum – 700 times the size of the annual decrease of the white population. Total personal income tax – presumably the proportion of tax revenue most affected by emigration of skilled South Africans – which makes up about 40% of total tax revenue, has also increased each year, from R3.88-billion in 2015, to over R4.92-billion in 2019. Similarly, the number of registered individual taxpayers has increased from 16.7 million in 2013 to 20.9 million in 2018.

Jack then stated : The tax facts in that article are correct IME. The SA tax base is constantly growing.


I then made the following statement:

Although that appears to be the information coming from the article, one would need to have that tax based analysed to exclude tax coming from government or semi government employees. We all know about the massive increases in staff numbers (and salary levels)at just about every level in government, including SOE's and VERY PROMINENTLY, municipalities!! These obviously reflect in the number of registered tax payers, but it is completely "false" as their income comes from the tax base in the first place.

So let me elaborate:

Based on the article, the growth in total revenue was from R1.07 trillion in 2015 to 1.29 trillion in 2019, which represents a total increase of R220 billion. Of this, about one half came from the “personal income tax” and represent R104 billion (4.92 – 3.88 they got their numbers a bit screwed up but 388 billion and 492 billion match the 35.9% of total revenue in 2015 and 39% of total revenue in 2019).

This is the only part of the article which could possibly be regarded as a “broadening of the tax base”, hence my objection as I do not believe this represents anything of the kind. Virtually the totality of the increase can be ascribed to bracket creep (which is NOT a broadening of the tax base), and to the massive increase in public sector employees (including SOE’s and Municipalities).

To support my contention, it is interesting to note that the total value of corporate tax increased only from about R202 billion to R206 billion, in other words it did not even keep up with inflation, not by many many miles!!!!!

The remainder of the INCREASE in revenue came from VAT (almost R40 billion increase, which once again does NOT represent a BROADENING of the tax base) and “other” (a total of about R57 billion, due to things like fuel tax, sugar tax etc. Etc.)

So I remain of the opinion that the article did not suggest a constantly broadening of the SA tax base.

C
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Re: Increasing tax base

Unread post by Jack Welles » Mon Oct 07, 2019 7:43 am

C Africa wrote:
Sun Oct 06, 2019 7:21 pm
So I remain of the opinion that the article did not suggest a constantly broadening of the SA tax base.C
:D Maybe we are just talking past each other (which is easily done with social media shorthand). The comments in the emigration thread to which I was originally responding was that the SA tax base is shrinking as a result of emigration of all these important people, a favourite refrain of those who have left, or are thinking of leaving, and wish to see ill where there is none.

I did not agree that it is shrinking and pointed to that article as just one independent indicator opposing the "opinions" of the leavers. While we can debate whether it suggests the base is expanding or not (to be honest I didn't read it that diligently, just flipped through), at least It would appear from your above comment that the article did not suggest that it was shrinking, which was, and which remains, my key argument.
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Re: Increasing tax base

Unread post by C Africa » Mon Oct 07, 2019 8:41 am

Whirly wrote:
Thu Oct 03, 2019 4:34 pm
So what happened to the 7.6 million registered tax payers as reported before? :? How did that grow to 20.9 million?

Whirly.

OK I think Jack & I are now on the same page.

I would like to comment on what Whirly said above.

Simple, the fact that if some-one is registered as a tax payer it does not mean they actually pay tax. So when you become unemployed or retire to become another leach sucking your government pension out of the fiscus, you remain on the register as a registered tax payer.

Hell even if you die you don't get removed until the estate has been wound up, and who bothers with winding up estates these days, so I am convinced that a significant portion of the registered tax payers are no longer alive.

So the growth of around 4 million tax payers since 2013, has been new entrants to the market, even if they just worked for a month or two and were registered for PAYE purposes. It does not necessarily mean any increase in the total number of people actually paying tax, which I believe remains at around 7 to 8 million.

And this is the crux of the difference of opinion that Jack & I had, my contention is that any growth in the number of people actually paying tax, has been almost exclusively in the public sector. The fact that there has been no growth in the corporate taxes indicate that there is almost no private sector growth.


C
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Re: Increasing tax base

Unread post by Piggy-Hawk » Wed Oct 09, 2019 11:18 pm

It might not be directly related to a larger tax base.

Could it be due to RSA's marginal propensity to consume?

South Africans spend most of their disposable income, as opposed to Europeans for example, who might save a larger part.

As more people earn an income, more is spent at Pick n Pay for example. Pick n Pay's suppliers do better and both employ more people, which indirectly increases the tax base (assuming that they pay a taxable wage).

Consumption spending forms the largest part of our GDP after all.

This had disastrous effects on Venezuela. Government started employing double the people to perform the same job, where only one person would be required, boasted that they killed unemployment, and the economy collapsed (not the primary reason).

Off topic, a Swedish scholar wrote a paper in 2012, evaluating the effects of unconditional cash grants and other forms of unearned income, on the South African marginal propensity to consume.

There were no positive outcomes in the entire trial, and it was found that South Africans dissaved against future unconditional payments/unearned income.
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