We pay over a portion of our earnings and profits in the form of taxes so that government can provide services such as security, transport infrastructure, social security, education and health facilities. These are but a few things citizens can expect from a working state. While all of government’s work requires planning and spending for the short, medium and long-term, far too often issues that require a long-term approach are neglected. This has the highest impact on a nation’s development, and it has dire consequences when government applies short-term thinking on state revenue streams to raise funds for short term cash shortages.
Two examples of our government’s problematic short-term revenue collection are the persistent increases in levies to the Road Accident Fund (RAF) and the fuel levy. We currently pay R3,93 per litre of 95 octane petrol towards the fuel levy, and another R2,18 per litre to the Road Accident Fund (RAF). These two levies alone make up around 40% of the taxes raised on petrol and diesel, and combined contributes around R120-billion annually to the fiscus. Just a decade ago, these levies drained about a third of that amount (i.e. around R45bn) from the pockets of the motoring and transport industries.
Motorists are a soft target when it comes to cash holes that need to be plugged. However, with the global shift to electric vehicles (EVs) rapidly unfolding over the next two decades, this reliance of taxes based on the consumption of fossil fuels is unsustainable. Our government’s conduct on short term consumption taxation is threatening the income streams of future administrators who will be hard pressed to find alternative sources of revenue.
The same short-term, unsustainable thinking by government applies to other consumption taxes, such as e-tolls, television licences and even those taxes applied to sugar, alcohol and cigarettes.
The problem is exacerbated by South Africa’s mushrooming debt position, another indicator of government’s short-term thinking that will only be felt by future generations. Future politicians will have to grapple with massive debt and dwindling revenue streams, not to mention how this will affect future taxpayers. Sadly, those responsible for the current short-term thinking, weak administration and looting will be long gone by then.
WHAT TO DO ABOUT IT
Civil society – in other words, organisations like OUTA with the help of supporters like you – becomes crucial in placing pressure on financial institutions to halt their lending to projects that further encumber South Africa and its citizens. We need to see stricter rules in place on how the money will be spent and accounted for. This may prove unpopular with certain political parties, who would rather see that South Africa ‘spend its way out of debt’ than answer to international lenders, but there is no doubt that we need clear terms and conditions to the lending for proper governance, transparency and accountability.
If we followed this approach in the past, it would have prevented infrastructure such as freeways and power stations built at twice or three times the price. It would also ensure that ideas such as the Karpowership-deal currently being contemplated, would not even get a sniff at the door of government procurement.
One has to wonder if Treasury does heed the need to evaluate the sustainability of its tax collection systems, and if so, is anyone listening to them? Innovative solutions are required to replace the incessant tax increases on various commodities and protect the economy from tax saturation and stagflation (a term used for slow economic growth and relatively high unemployment accompanied by rising prices).
The involvement of civil society and business is essential in this process, as the state is often blinkered when it comes to long-term trends and the planning required, resorting instead to a short-term approach to deal with the current funding crisis (which have come about due to poor long-term planning). We, the people of South Africa, need to break this vicious cycle.