Nothing good about higher personal income tax – Solidarity

The trade union Solidarity today warned that the growth in state income due to the increase in personal income tax is harmful to the economy as a whole. This follows after the South African Revenue Service (SARS) yesterday put the higher than expected increases in personal income tax in a positive light in their latest tax statistics bulletin.

Gerhard van Onselen, researcher at the Solidarity Research Institute, says the increases in personal income tax can partly be attributed to the extraordinary growth in the remuneration of civil servants in 2014/15. Moreover, the increase in personal income tax in the private sector can be attributed to the relatively high private sector salary increases, as well as other once-off factors. The impact of the percentage point increases in income tax, which was introduced on 1 March 2015, is not even taken into consideration here.

“Together with the increase in tax, the high expenditure on civil servants’ remuneration is further choking the economy. The state’s constant withdrawal of resources from the private sector leads to a continued relative decrease in capital investment by the private sector. Furthermore, the state uses tax money to increasingly create an unfriendly business climate and thereby paralyses the private sector. Naturally, the result is a negative impact on economic growth,” says Van Onselen.

“In addition, lower company taxes indicate a struggling private sector suffering under a heavy burden of thoughtless government over-regulation and disregard for property rights. As a result, the rising remuneration of employees in the private sector is not sustainable in a weakened economy,” Van Onselen warned.

Van Onselen believes there is reason for concern in that government continuously increases income tax rather than to implement cuts to government expenditure.

“It is outrageous that workers have to tighten their belts while the government is spending money as if they have access to unlimited resources,” Van Onselen said.

Issued by Gerhard van Onselen, Researcher: Solidarity Research Institute, 11 November 2015