Ahead of tomorrow’s budget, I thought that I might re-share a few things about our tax system. Specifically, who pays South African tax, and how those tax revenues get used. Here goes:
Who is paying all those taxes?
I’ve spent some time with the 2016 Budget spreadsheets (you can find them here), and I’ve made some graphs.
The breakdown of income tax:
There are about 927,000 of those “The Rich” income taxpayers. That’s the top 1.75% of the population. And if you earn more than R1.5 million a year, then there are only 95,000 of you, which is roughly the top 0.1%.
Here are all of the 2016/2017 planned tax collections:
And in case you’re wondering who pays all of those other taxes, I’m going to lift the some points from the “How SA Non-Income Taxes are paid” post:
- Company Taxes and Dividend Taxes are taxes on shareholders. Those shareholders…tend to be people that already pay income tax. And they’re almost entirely the people in the top decile.
- The same goes for Property and Estate taxes. Those are paid by the wealthy (you have to be worth more than R3.5 million on your death before you become liable for estate duty, or you have to be buying a home for more than R750,000 before you become liable for even the first cent of transfer duty).
- Customs and Import Duties are mostly passed on to customers through higher prices. And (I guess) those would be distributed similar to any VAT distribution, because it’s an indirect tax on spending.
- That leaves us with VAT, the Fuel Levy, and Excise duties. That is: the indirect taxes.
- Of those indirect taxes, VAT and the Fuel Levy are tax neutral, in that everyone pays a similar percentage of their income toward the tax.
- Excise Duties tend to be regressive, in that the poor pay proportionally more of their income toward them.
- But this regressiveness is mostly offset by social grants.
How will the money be spent?
If you look at it by department:
But if you reconstitute that into the “economic” classifications:
Things that I’m looking out for tomorrow
Everyone is, of course, looking to see what kinds of tax increases are on the cards (they’re definitely on the cards). But here are a few other things that I’m interested in:
- Whether there has been any real change in the income tax paying class. There has been concern that the rich are fleeing South African shores – so will this translate into a reduction in that top tier of taxpayers?
- Has the National Treasury actually managed to achieve a reduction in the public sector wage bill (last year, they were planning on doing it by trying to not replace staff as they left government employment)?
- How are companies doing? 2015 and 2016 were tough years for business – have those tax collections started to taper off, or even fall?
Rolling Alpha posts about finance, economics, and sometimes stuff that is only quite loosely related. Follow me on Twitter @RollingAlpha, or like my page on Facebook at www.facebook.com/rollingalpha. Or both.
Mark February 21, 2017 at 19:50
the crazy thing is governments attitude that it has an absolute right to a certain size budget, so we will have tax increase but no spending reductions or changes in policy.
I truly hope that the rich have started leaving or are engaging in ” aggressive tax mitigation strategies” mainly because I like to see how a government reacts when stuck between a rock and hard placeReply