Robin Hood Mentality Continues for high income earners in budget 2012
Cinzia de Risi The tax proposals in the 2012 Budget really comes as no surprise. The trend of the past number of shifting the tax burden from lower income earner to the higher income earns continues. Specific examples of this are:
• the move from a medical aid rebate to a medical aid credit. The reason cited for this change is that the relative value of this form of relief does not increase with higher income earners – a direct reference to not benefiting higher income earners.
• Retirement reforms curb the tax deductibility of contributions from high income earners, with maximum contribution deduction level set at R300 000.
• Perhaps the most concerning proposal are the funding options for the national health insurance, with the Budget alluding to a payroll tax on employers and/or a surcharge on the taxable income of individuals.
• The increase in the maximum rate of Capital Gains Tax from 10% to 13.3%
With only around 10% of the population currently contributing to the tax revenue of the country, and the ratio of taxpaying individual to social grant receivers exceeding 4:1, it begs the question whether this approach is sustainable?
What the Minister seems to have overlooked is that it is these very employers and high flyers who are creating employment opportunities for the lower income earners – the very class of taxpayer the budget benefits. What happens when the burden is too much or the incentive too low to continue?
Furthermore, once the effect of increases in other tax types is factored in, do the lower income earners really benefit? With a proposed increase in the general fuel levy and road accident fund of 20c , there will be a guaranteed knock-on effect on the price of food and basic transportation, leaving the lower income earner back at square one.
Should the focus rather not shift to broadening the tax base, possibly via an aggressive skills development programme so that people can be employed? The reforms are geared at fairness of the tax system and equity – surely this means that all South African should be contributing to the system and not only a few.
