How Many Days A Year Do You Work For The Taxman?

A2In the last few years in particular we have been aware of tax increases. The Free Market Foundation measures how many days in a tax year it takes to pay our taxes (taking total taxes over total earnings – obviously in reality we pay taxes monthly, or twice-yearly for provisional taxpayers).

Compared to last tax year, it will take us two more days to pay tax – on 22 May  we will have settled our owing to SARS and only from the 23rd will we work for ourselves. That’s 142 days (4 months and 22 days) we’ve worked for the taxman.

”Tax Freedom” Day gets later every year …

Since 1994, the number of days taken to pay tax has risen by 29 days – if we stick with the current trends, it means that each successive generation will work one extra month to pay tax.

Is this good or bad? 

It depends how government is spending its money. If the money is going on infrastructural projects that will increase productivity, this will increase economic growth over the medium term. In South Africa’s case the major trend has been the increase in the number of civil servants employed. Since 2009 our debt to Gross Domestic Product (GDP) has doubled which has put the country under unnecessary pressure and is one of the factors that alarms rating agencies.

Where to now?

One of the issues that worried former Finance Minister Gordhan was the sudden decline in “tax buoyancy” which measures how revenue collections respond to changes in national income. For example, tax buoyancy would be positive if GDP rose by 1% and revenue collections increased by 2%. In the 2016/17 year SARS fell R30 billion short of its collection target for the first time since 2009.

Potentially this can mean that taxpayers are taxed to the hilt (remember 4% of the population pay the bulk of our tax) or perhaps more worryingly, what amounts to a tax revolt is beginning. The people who pay most of our tax have the resources to avoid tax (remember that whilst “tax evasion” is illegal, “tax avoidance” using tax laws legally is allowed) or to find work in another country.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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