DAWIE ROODT: This is why it is remarkably expensive to be rich in SA
Unfortunately, our political leaders treat the wealthy as a perennial and inexhaustible money tree
A few days ago I spoke to Business Day editor Lukanyo Mnyanda about the upcoming budget. I also inquired about the profile of his readership, and he provided me with a very detailed breakdown.
The reason I asked was because I suspected the typical Business Day reader has a profile that makes him (yes, most of you are males — 62%) a popular tax target, but at the same time a profile that is largely ignored as a potential tax beneficiary.
Just keep in mind that words like “typical” and “average” are part of the vernacular of economists, which is unfortunate because everybody is unique and special. But since most data today is big data, averaging is likely to hit the target often enough. Still, I apologise to those who are not average.
So, who are you? Your home language is English (40%), you are a full-time worker (56%) with a post matric qualification (40%). Most of you are married (47%) and have children under 18 years (69%). More than 60% of you are middle or senior management or business owners, you own a big house and you are 50 or older (62%).
Business Day editor Lukanyo Mnyanda joined Dawie Roodt, director and chief economist of Efficient Group, to talk about the 2021 budget speech delivered on February 24 2021 by finance minister Tito Mboweni. #Budget2021 #SABudget #SABudget
But the part that interests me most is your income. Thirty-eight percent of you receive no income, presumably because you are students or nonworking spouses. But of those who do work, more than half earn over R20,000 per month, while 10% earn more than R70,000 per month.
Note: “More” than R70,000 per month may mean much more, and since Business Day is a leading business newspaper, I have a suspicion that just about all the high earners in the country read it. Let’s assume the “average” salary of our working man is R100,000 per month.
From the info above I would typify the average reader as a married man with two school- or university- going children. You are in middle-top management, you own your house and your wife either also earns a salary (in which case my calculations below need to be revised) or she is a housewife.
How much tax does your family pay? A few notes of caution: I will only use “national” tax data and I will ignore local taxes and other levies and taxes. I will also ignore the fact that the fiscal deficit should be included as part of total tax — it is also a tax, just postponed. Lastly — and this is an unrealistic assumption — I assume the state is effective and efficient.
The total budgeted (mostly tax) revenue for the state is expected to be R1.1-trillion for the new fiscal year (2021/2022). There are about 60-million people in the country, which means the average per capita tax is R22,528. We would expect our family of four to contribute R91,113 (R22,528 x 4) to the state.
But we know our family earns R1.2m per annum, on which they pay R492,000 in the form of personal income tax. Further, our rich family is certain to spend a lot on consumption, which means it will pay more VAT than most. And then there is also company tax, for which senior managers or business owners are indirectly liable. And all those other taxes, including transfer duties, dividend taxes, capital gains tax and many more.
After adjusting for only some of these other taxes (certainly not all), I have calculated that the average Business Day reader family whose profile I have constructed will pay at least R664,147 annually, or R166,147 per member on average (R664,147 ÷ 4), compared with the average per capita tax of R22,528.
But that is only one side of the equation: what of the spending side of the budget? Total state spending amounts to R1.83-trillion, or R30,572 per capita. But your family does not make use of state education, state medical services, state grants or many other state services. Deducting some of these items, your family actually receives at most R12,761 per capita from the state — in the form of police services, defence, infrastructure and the like. And it is quite likely that you make minimal use of these services.
That means, based on this very conservative estimate, for every rand your family pays to the state it receives at most 8c by way of goods and services — assuming an effective and efficient state — but probably a lot less. This illustrates the huge redistributional role of the state.
But there is so much more. Your family pays for the education, health, and other benefits for people who also don’t use these services because they also have their own medical, pension and retirement funds. All of these additional expense items should be added to their tax bill — in a way these are privatised taxes.
From these rough estimates it becomes clear that it is exceptionally expensive to be rich in SA. But it also illustrates how much we need and depend on our rich taxpayers. Unfortunately, our political leaders treat you, the average Business Day reader, as a perennial and inexhaustible money tree.
But even money trees need to be fed. Until that happens you can regard yourself as being treated by the political elite mostly with contempt.
• Roodt is chief economist of the Efficient Group.
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