Gordhan's redistribution budget not sustainable - Solidarity

Solidarity today stressed that South Africans' welfare cannot be multiplied by means of a redistribution budget. Only a third of Finance Minister Pravin Gordhan's medium-term budget is not devoted to redistribution. It is clear that the government is prepared to be very effective in extracting more tax from hard-working South Africans. Though Gordhan said a lot about more efficient spending, this statement is a refrain that is repeated each year while the opposite happens in practice. 

According to Piet le Roux, senior economics researcher at the Solidarity Research Institute, the so-called tax relief given to South Africans in Gordhan's budget speech in February was purely superficial. ‘Gordhan confirmed in the medium-term budget that the tax burden is indeed continuing to grow. Gordhan boasted that growth in tax collection can be attributed to continued improvement in tax compliance. He budgeted for tax collection to increase from R901 billion to R1,2 trillion by 2015. What Gordhan described as better tax compliance is, however, nothing more than heavier tax on hard-working South Africans.'

Le Roux said the emphasis on better tax collection stood in contrast to the government's spending side which he described as a ‘dark hole of counterproductiveness'. ‘Tax represents scarce resources taken from people who create wealth. It prevents them from creating wealth for everyone through the market economy. What is more, this money is regularly misspent by the government - often with counterproductive results.'

Gordhan warned that South Africans' commitment to pay tax should never be taken for granted. Le Roux agreed with the minister's statement, saying that inefficient government spending would cause taxpayers to become increasingly aggrieved about paying tax. 

Statement issued by Piet le Roux, Senior economics researcher: SRI, October 25 2012

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