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Personal tax not used effectively

By unknown | Feb 17, 2009 | COMMENTS [ 0 ]

Isaac Moledi

Isaac Moledi

Tax expert Kemp Munnik says his biggest single gripe about South Africa's personal tax is that it is not perceived as value for money.

He says while some countries have a higher personal tax rate, citizens in those countries do not have to pay for health, education or often retirement.

"The cost of education, health and defence are effectively double what they were at the end of the Mandela administration, with little noticeable improvement in those sectors," Munnik argues.

He believes the focus should be on effecting efficiency from the money that the government has, before asking taxpayers for more.

In particular, he believes that the huge amount of money spent on defence is inexcusable.

Munnik, a tax director at accounting firm BDO Spencer Steward, describes Finance Minister Trevor Manuel's latest Budget as mere tinkering.

"For lower income individuals, Finance Minister Trevor Manuel has with one hand given substantial tax concessions, but with the other taken it right back with substantial increases in levies on fuel, alcohol and tobacco. In reality, their financial position is left unchanged," he says.

Munnik says if the purpose of such levies is to be "sin taxes", then it has demonstrably failed, as the number of cigarettes smoked in South Africa is almost identical to what it was eight years ago.

"Two other endemic problems have been ignored. As a developing country, South Africa needs to attract large volumes of foreign direct investment and to accomplish this requires incentives.

"Though such an amendment wasn't anticipated, I nonetheless feel it is a missed opportunity at this time when capital flows might be expected to resume during this year, that South Africa has not put in its bid to capture at least some of these flows.

Munnik says Manuel could have considered incentives for specific industries, especially in infrastructure development, electricity generation, information technology and mining, which currently have to import large numbers of skilled workers.

"A tax break linked to local skills development would have been welcome and cost-effective," he said.

Even more tragic, he says, is that the perennial problem of getting South Africans to save more has again not been addressed.

"The government wants South Africans to save more, but high inflation and tax on interest create an environment conducive to spending, rather than saving," Munnik says.

He says it takes years to inculcate a culture of saving, so not a moment is to be lost.

"The government should have considered increasing the tax-free portion of interest or creating incentives to save for retirement, which would ultimately reduce the state's liability to support pensioners," says Munnik.


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