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.

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.