Koketso Moeti
Koketso Moeti

Debunking the ‘five million taxpayers’ myth

To evidence the “unsustainability” of social grants, it is often pointed out that in South Africa “there are only five million tax-paying citizens and 15-million social grants recipients”. The insinuation made is that the five million single-handedly subsidise the poor, thus bearing the brunt of the social assistance burden.

This argument, however, ignores that income tax is not the sole form of tax in South Africa. The most common form of taxation is Value Added Tax (VAT), an indirect tax on the consumption of goods and services in the economy, which is fixed at a standard rate of 14% on the supply of most goods and services. So, apart from a few basic tax-exempted goods, everyone who makes a purchase pays this tax is charged at each stage of the production and distribution process.

Gallo Images

Gallo Images

Another means through which South Africa also collects revenue is through excise duty, which includes fuel levy, among others. Each time a social grant recipient uses public transport, which uses fuel purchased with users money – guess what? They are paying tax once again, including those without electricity depending on paraffin – thus debunking the “tax-paying citizen” myth. There are also other forms of taxes not included here but the point is, contrary to popular belief, by virtue of social grant recipients purchasing food and other items and using public transport and all – they too are tax paying citizens and also contribute the country’s revenue.

Instead of being so concerned about revenue subsidising the poor, what should really be bothering us is how much of our revenue supports corporates.

Lest we forget, some years ago when citizens faced big electricity tariff increases, it was discovered that BHP Billiton’s Mozal, Hillside and Bayside smelters paid considerably less than everyone else for electricity. This despite being among the largest consumers of electricity, using 9% of the country’s production thereof. This allowed BHP Billiton at less than one-fifth of the tariff paid by consumers, both household and industrial.

According to a report by Beeld newspaper, Cape Town-based consulting electrical engineer Johan Anderssen calculated that Hillside at the time was paying 22.65 cents per kilowatt hour (kWh) to Eskom, whereas households paid an average of R1.40 per kWh. Because it costs Eskom 41 cents per kWh to generate electricity, this means BHP Billiton was paying almost 50% less the production rate, which significantly contributed to the electricity tariff hikes for ordinary consumers.

The deal between Eskom and BHP Billiton is said to be set to end only in 2028 and was signed by Alan Morgan, the then executive director of Eskom, who went on to become the parastatal’s chief executive in 1996. In 2001, when Billiton expanded their Hillside factory a slight increase was made on their tariffs for the extended section believed to be at around 32 cents per kWh, still significantly lower than for many households.

The foreword to a damning report by the South African Human Rights Commission (SAHRC), released earlier this year notes that, “the tragic death of four people, killed by police, while protesting the lack of access to clean drinking water in Madibeng (place of water) Municipality demands an interrogation of priorities. Madibeng is in the platinum-rich North West province, where mining companies, agribusiness and tourist industries surrounding the four dams, including wealthy Hartbeespoort, pay less per kilolitre than poor households. Yet they use and pollute most of the water, with little or no Government regulation”.

According to the deputy chairperson of the SAHRC, Pregs Govender, big mining companies, business and agribusiness consume and waste most of the country’s water and yet pay the least for it.

What all this tells us is that more than the biggest beneficiary of subsidies from tax-paying citizens is big business and that instead of the current attitude of disdain towards the poor, the focus should instead shift to demanding accountability from corporates – the real tax-payer burden.

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    • margarita

      Good article Koketso, which cuts to the chase. The Mail and Guardian can be rightly proud of your kind of incisive journalism.

    • Joel Headlight

      Correct Koketso. Nevertheless, ‘they’ will resist & tell you that big business creates economic growth (of 1-2 paltry % it now seems in a country with conservative ‘cost of living’ inflation at 6-8%… & this ‘cost of living’ 8-16% increase paid by all to either big business or big parastatals). They will tell you that the material burden of the poor will systematically bring us all down as they do not create & therefore contribute nothing to society (but, as you rightly point out, even the poor must commute, consume & desperately create something out of ‘nothing’). Baloney baloney I say to ‘them’! The poor have never been a concrete threat to me & my anxious middle class. Historically the French revolution reveals a European middle class created no less by the revolt of the demonized poor against the 1%. The middle class is actually being slowly, ‘unnoticeably’ destroyed by big business with its wage stagnation, middle management down sizing; global outsourcing & uncompetitive ‘cost of production’ subsidisation (by both the money lending banks & money taxing governments). In truth the biggest danger to my middle class (in both America & South Africa) is that the government we voted for is now more heavily invested in subsidising big business for its growth & survival (& boy is our government growing at an alarming rate) than in its own citizenry.

    • Mark Linderoth

      We can demand accountability from government, through our vote. Government, in a healthy democracy (in this case – one where government is accountable to people through a balanced electorate), should then put in corporate governance measures to encourage the corporates to operate for the broader good. These are their respective roles in a functioning society. In South Africa, government and big business have a dysfunctional relationship (bribes, corruption, lack of vision, unity
      in representing a developmental model for SA etc)

      Most people are happy to pay their taxes provided it is used for the upliftment of fellow South Africans and the improvement and maintenace of infrastructure that allows the country to develope. Where people have a problem is when the tax payers money is stolen by corruption in government and doesn’t reach the poor.

      The real tax payer burden in South Africa is the unaccountable government, voted in largely by the poor people of South Africa. While I believe that the general ‘values’ of the ANC are probably the most balanced for the needs of South Africa as a country, the lack of a broad electoral support for a strong opposition to keep the ANC accountable, because of the voting habits of the poor, are the reason many tax payers (who pay tax from their salary or business) are negative about the positive role the poor have in contributing to South Africa as a growing country that will be able to address the needs of the poor. (Social welfare and employment.)

    • SloopJB

      Fully agree Koketso.
      The aluminium producers are the worst when it comes to squandering huge quantities of electricity, they also get it subsidised! Surely the ANC govt had the right to renegotiate those contracts as they did not sign for them? Pressure could have been brought to bear thru load shedding..

    • Odge

      So why does the anc government allow what you describe to happen? Don’t blame big business if the government allows the inequalities to exist.

      Secondly the grant system does 2 things, it creates a dependent citizen not an independent working citizen and in the case of child grants it creates corruption at the lowest level so all become immoral allowing for grand corruption at the highest level. Just by simple analysis of the figures 80% of all children in SA are on the child grant system. So 80% of children come from low income mothers. I don’t say families because they don’t seem to exist as the fathers income has to be ignored to qualify.

      There is something hugely immorally wrong happening in our society.

      SA is NOT rich enough to be a welfare state.

      I still maintain that by 2022 SA will default on bond payments. The rand will continue to weaken and our debt continues to grow with only one possible outcome, namely, Bankruptcy).

    • Mark Linderoth

      The biggest beneficiaries of the tax paying citizens are a corrupt government, that does little to hold big business to account because its in bed with it. And disdain to the poor? Maybe because they don’t vote in a strong opposition to keep the government accountable to them?

    • Bob

      Sources of state revenues 2012/3 = Vat – 26%, fuel levy – 4%, Personal, Company taxes ,Customs and Excise – 67%, Other – 3% – do the math Moeti

    • Brian B

      Its futile to quibble about who bears the tax burden. Social grant recipients do pay consumption tax VAT etc. which means that tax money is being recycled.
      Corporate s get tax breaks to generate exports which create wealth and work opportunities.
      The task of government is to ensure that the strong and powerful do not exploit and those sectors of the population who are vulnerable are looked after.
      The current government exploits the situation to line their own pockets and look after their friends
      Education,health, law and order and services are all in a state of decline and neglect.
      In order to rebuild the country everyone’s commitment , ability, experience and energy is needed.
      Until there is a realization that the country is in dire straits and needs reform , the concepts of freedom and democracy will continue to ring hollow.
      The choice is prosperity and growth or stagnation and depletion of national assets

    • Never_Simone

      Nicely done – lumping personal, company, and C&E into the same category. Helps with your obfuscation goal. Now, the real question is… can YOU do the math?

    • Bob

      It is unlikely that anyone or any company NOT counted in the “registered 5mil tax paying fraternity” are contributing – other than by way of VAT, to the 67% I “lumped together” – you do the math – there is no obfuscation here – just facts produced by SARS and the Government?

    • Bob

      It is unlikely that anyone or any company NOT counted in the “registered 5mil tax paying fraternity” are contributing – other than by way of VAT, to the 67% I “lumped together” – you do the math – there is no obfuscation here – just facts produced by SARS and the Government?

    • Over It

      the real burden is that there is taxation without representation.