I celebrated the end of Gauteng e-tolls this past week. It was a pleasure to see a government system being shut down. Such occasions are rare. Politicians don’t like shutting down government systems and agencies. Even Nobel economist Milton Friedman used to highlight that in the 20th century. Every Gauteng taxpaying, vehicle-owning citizen should celebrate. The e-tolls were another system by the government to harass South Africans, as the government always does with its systems and agencies.
The Organisation Undoing Tax Abuse (OUTA) deserves praises for its persistent fight against Gauteng’s e-tolls over the years. Civil society plays an indispensable role in a democracy. OUTA reminded us of that. Those who have supported OUTA since its founding, should be thanked. OUTA could maintain its fight against e-tolls through people’s support.
The e-tolls were contributing to the already high cost of living and high cost of business operations in Gauteng.
The government collects different kinds of taxes from South Africans – from personal income taxes to fuel levies, to VAT, to capital gains, estate duty, donations tax, transfer duty, air passenger tax, and others. We are taxed daily to finance government's inefficient, wasteful programs.
Judging by the state of the country, the benefits from the taxes we pay are disappointing.
Think of the astronomical levels of crime we endure in the country, the lack of safety as tax-financed law enforcement fails to meet its mandate. The dire state of our public education and healthcare. The collapse of our cities and towns. We are not getting the returns we ought to be getting given the amount of taxes we pay to government bureaucrats.
We should reflect and understand how the government destroys wealth creation through taxation. Taxation kills wealth. That has been true throughout human history. Hence, our mission as a society must be to keep our taxes as low as possible.
In one of my recent videos for my YouTube channel, I asked South Africans to take time to sit down and calculate how much wealthier they would be were they not forced by the government to pay taxes. I have reflected about this and calculated. I would be living a better life than the one I am living now. Very few people think about that. Taxes, especially our high tax rates have been normalised and that is sad to see.
Why do we elect not to question the tax system, especially in a country like South Africa, where corruption is rife?
Public sectors like education and healthcare receive massive amounts of taxpayer’s funding, yet the outcomes are dismal, and the infrastructure is in terrible shape.
In her brilliant book, “Countdown to Socialism”, Anthea Jeffery who is head of policy research at the South African Institute of Race Relations (SAIRR) discusses the shortcomings in public education and healthcare. Our socio-economic ills have little to do with lack of finances. It's incompetence and mismanagement of public finances that is hurting South Africa.
Given the current state of politics in South Africa, where political parties and organisations that support bigger government and higher rates of taxation are widely supported, it’s not surprising that South Africans have not really reflected on the impacts of taxation on their lives. Amongst the things that have repressed South Africa’s economy that grows at less than 1%, are high tax rates.
At the Democracy Unplugged session in Sandton recently, organised by Podcast Party SA, I pointed out that when you combine the ANC, the EFF and the MK Party, along with other leftist organisations, like the SACP and COSATU, they make-up the majority in the country. That is concerning to me, and so long that is the case, we will not see any serious positive changes in the country.
I have argued that for things to change for the better, the Multi-Party Charter (MPC) must do well in this election. In other words, South Africans should give it a chance. South Africans should stay away from leftist parties like the ANC, EFF, and the MK Party. Such parties are not what South Africa needs at this point.
The MPC led by the DA are largely cautious on government and advocate for a stronger private sector.
Part of the problem with South Africa's economy is lack of competitiveness. Economist Dawie Roodt has pointed to this. One of the ways we can improve our competitiveness is to adopt tax rates that are attractive to investors. Investors are important because they create things, invest in the expansion of industries. Hence, it's important that we think about them when we formulate public policy. There was nothing attractive to an investor about e-tolls.
Taxes can only be competitive if they are lowered, not increased. Given the relatively better infrastructure we have in Sub-Saharan Africa, lower tax rates would be good for this country.
The personal income tax rate is 25% in Botswana, and in Mauritius it’s 15%. I believe that we must aim to set our personal income tax rate along the lines of Mauritius and Botswana, to boost our economic growth rates. The 45% we currently have is very high.
We are a society taxed into poverty. Part of the problem we face is that people are not taught about the negatives of taxation. We also have people, influential leftists, who perpetuate the idea that higher taxes are noble and somehow will result in prosperity. Not true!
There is a call by some for a wealth tax. Totally shortsighted! The notion that we should tax more and spend more to raise our standards of living is flawed and will not address our core problems.
E-tolls are now behind us. Hopefully, we have learned something from the episode. We should resist government systems that are not necessary and are costly to our society. It’s our responsibility as South Africans to do so.
Phumlani M. Majozi is author of a new book “Lessons from Past Heroes” and a macroeconomist and political analyst. He’s the host of The Phumlani Majozi Show on YouTube. Subscribe to his show here: Phumlani M. Majozi - YouTube.
