Additional tax category needed for super rich - COSATU

Federation says Pravin Gordhan should impose additional taxes on land, luxuries and exports of strategic minerals

COSATU's Expectations Statement for 2013/2014 Budget

25 February 2013


COSATU has huge expectations from the 2013/14 budget to be presented by Minister of Finance Pravin Gordhan on 27th February 2013. We expect the Minister to allocate more resources towards the five key priorities set by government in 2009: decent jobs, education, health, rural development and fight against crime and corruption. The priorities are meant to address the triple challenges of high levels of unemployment, poverty and inequalities.

We know already that whilst a lot has been done, government is still far in realising the objectives set in 2009, particularly as they relate to the creation of decent work. The Quarterly Labour Force Survey (QLFS) for the fourth quarter of 2012 shows a decrease of 68,000 in employment. The official rate of unemployment declined marginally from 25.5% in the third quarter of 2012 to 24.9% in the fourth quarter. If people who had stopped looking for work due to hopelessness are included, the unemployment rate fell from 36.3% to 35.9% in the same periods. This rate of unemployment is still very high by international standards. Compared to the 4th quarter of 2011, there has been a marginal increase of 80 000 jobs, which represents a mere 0, 6%, in the 4th quarter of 2012. In the same period, unemployment rate increased by 6, 1%, which represents 257 000 job losses.

Manufacturing, trade and private households industries shed 139 000, 59 000 and 42 000 respectively between the 4th quarter of 2011 and the 4th quarter of 2012. The community and social services industry, which includes the public sector, saw employment growth of 126 000 between the 4th quarters of 2011 and 2012. The QLFS also shows that the proportion of the unemployed persons without matric has remained largely unchanged since 2008 at around 60%. In the 4th quarter of 2012 the share of the unemployed persons with matric was about 32% and for those with tertiary education at 6%. This once more demonstrates the centrality of education in addressing the triple challenges of unemployment, poverty and inequalities.

Accordingly to the Human Development Report, 44% of workers in South Africa live on less than R10 a day. Income inequality is still rampant; on average, each of the top 20 paid directors in JSE-listed companies earned 1728 times the average income of a South African worker. All sectors of the economy, the financial, manufacturing, machinery and equipment, pharmaceuticals and mining are highly concentrated and dominated by a few companies, which in many instance are foreign owned.

Agricultural land-ownership remains concentrated and colonial. Estimates are that Black people own between 13-16% of agricultural land in South Africa. Only 10% of the 30% land earmarked for land restitution has been transferred to black farmers, the target date for the 30% is 2014. Efforts at land redistribution have largely been unsuccessful because of lack of post-reform support to beneficiaries. It is estimated that more than 70% of redistributed land became unproductive after the reform process.

The crisis in education persists and the quality of education is declining, despite improved matric results in 2012. The poor's children remain trapped in inferior education with wholly inadequate infrastructure. Many schools depend on boreholes, rainwater or have no access to water on or near site, have no arrangement for disposal of sewage and many still depend on pit latrines, have no source of electricity on or near site, have no libraries or libraries are not stocked, have no laboratories, or laboratories are not stocked and have no computers or more than 100 learners share a computer. A huge number of schools have class sizes of above 40 learners.

There are many challenges ranging from the shortage of staff to equipment and medicines in the public health sector and we note the 10-Point-Plan of the Department of Health is meant to address many challenges in the public health sector.

Our Expectations from the Budget Speech

The 27th February Budget Speech would be the Minister's penultimate speech before the 2014 general elections. We do not expect business as usual and the speech must be in synch with the resolve of the ANC, which we are in alliance with, that the next decade of democracy must be dedicated to radical economic transformation.

We expect the Minister to dramatically increase the funds allocated for land reform. Sufficient funding must be allocated to reform support programmes that can ensure the success and sustainability of land reform beneficiaries.

We expect the Minister to allocate more resources to ensure the realisation of the expansion of the FET sector to accept 1 million learners per annum by 2014, compared to the current 400 000 per annum. This will in turn reduce the youth labour force, by extending their stay in the education and training system, so that they acquire basic and high-level cognitive skills.

We expect the education budget to be increased substantially to ensure that the education infrastructure is improved; the mud schools are eradicated and that there should be no teaching under the trees. This must also enable government to overtime establish its own publishing company to eliminate corruption in the procurement of books.

We call on the Minister to announce a process to introduce tax reforms which in our view should ultimately result in the following:

a) Introduction of progressive tax system, with an introduction of a tax category of the super rich

b) Introduction of solidarity tax, whose aim is to cap the growth of earnings of the top 10% and to accelerate the earnings of the bottom 10%

c) Introduction of tax on both domestically produced and imported luxury items, but a higher tax on luxury items which are imported

d) Increase in the secondary tax on companies to encourage re-investment, job-creation and to reduce the financialisation of company assets

e) Imposition of a land tax to aid the process of land redistribution

f) Zero-rating of medicines, water, domestic electricity and public education

g) Introduction of export taxes on strategic minerals, metals and other resources to support downstream industries and to promote value-addition

h) Introduction of investment tax credits to encourage local procurement of machinery and equipment

i) Increase tax on financial transactions including capital gains tax above a certain minimum threshold to limit short-term capital flows and to encourage productive investment, and speed pumps on short term capital flows to discourage hot money

j) Introduction of tax on firms that are stubborn in closing the wage gap

k) Taxation of firms that pay below the statutory minimum wage, and the distribution of such tax proceeds back to the workers concerned

We repeat our call for abandonment of inflation targeting and target economic growth and employment targets. We call for the reinstatement of capital controls to prevent the asset stripping of South African industry.

We expect the Minister to announce the phasing-out of the use of tenders to enable the state to directly absorb the unemployed in the delivery of a range of basic services, including the building and maintenance of infrastructure. In so doing, the state is supposed to support local supplier industries through targeted procurement and to build and broaden industrial linkages in order to increase the labour absorptive capacity of the economy.

Health budget must be increased substantially to enable the speedy implementation of NHI. This must also enable the integration of the Community Care Workers into the public service and the reopening of nursing colleges to ensure the training of more nurses in order to increase the nurse/people ratio from 4 (per 1000 people) to 8 per 1000.

Statement issued by Patrick Craven, COSATU national spokesperson, February 26 2013

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