The poor middle class taxpayer has lost out most in the Budget — again, writes Reg Rumney
The Budget presented to Parliament by Finance Minister Chris Liebenberg this week tightens the tax clamp on South Africa’s middle class, particularly professionals. The top marginal rate was raised, tax tables were not adjusted to counter inflation, excise duties on tobacco and alcohol were raised, as was the fuel levy, and there was a crackdown on the kind of perks enjoyed by middle and upper-income earners.
High-powered married women executives will be hard hit.
The Katz Commission of Inquiry into Tax proposed raising the threshold at which marginal tax becomes payable to R150 000 at the same time as recommending that the top tax rate be raised to 45 percent from 43
The commission also recommended adjusting the tax tables to correct “bracket creep” or “fiscal drag”, whereby inflation-related salary increases push the unfortunate taxpayer into a higher tax bracket where the increased tax neutralises his gains. This was not even mentioned in the Budget.
The Budget raised the so-called “marginal” rate to 45 percent, but left the threshold, at which the 45 percent begins to apply, at R80 000.
That threshold has begun to look too low, thanks to inflation-linked salary increases.
“It is high time the government reviewed the R80 000 level for maximum marginal rates. People in this income group contribute substantially to the economy, and for them to continue without tax relief appears to be pure pro-socialist discrimination against a successful part of the community,” notes Momentum Life tax manager Kobus Oosthuizen.
Syfrets economist Elmien de Kock notes most of South Africa’s population earns less than R50 000, and most earn below R38 000. Such lower-paid taxpayers will benefit most from this redistributive Budget, especially as primary rebates have been increased by R400 to counter the effects of doing away with the child rebate. At R100 a child, this benefited the poor most in any case.
However, the biggest chunk of income tax revenue comes from those earning between R50 000 to R80 000.
So the small percentage of people who pay most tax must cough up even more.
Kessel Feinstein tax partner Beric Croome points out that from R45 000 up everyone pays more tax.
Moreover, he adds, the Budget has widened the gap between the personal income tax rate and the corporate rate, leaving the way open for serious distortions of the tax system.
The corporate rate stays at 35 percent, if no dividends are declared, making for a 10 percentage point
The only recommendation of the Katz Commission to have been wholeheartedly embraced in the Budget, the scrapping of tax discrimination on the basis of gender and marital status, will benefit many. It will translate into a loss to the fiscus of R2-billion, but a like amount will be clawed back by fiscal drag.
While the single tax table will benefit many poorly paid female workers, families in which married women earn more than R80 000 will be hit hard because married women used to pay marginal tax of 40 percent. At a stroke this now becomes 45 percent.
Liebenberg has looked to individual income tax to supply the lion’s share of the tax needed during the 1995/96 financial year.
Personal income will, as it did last year, yield 10 percent of gross domestic product, the total value of all goods and services produced in the economy.
Value Added Tax, the second-most important revenue source, will again provide 6,5 percent of GDP.
Liebenberg could not raise the money he needed by the simplest method of all, a one percentage point increase in VAT.
The powerful union movement has been vociferiously opposed to any increase in Value Added Tax, having campaigned against the introduction of VAT as a tax that hits the poor most.
The counter argument is that VAT involves some choice. The consumer can avoid paying the tax by saving instead of spending. There is no choice in income tax.
Pressure from the union movement meant no increase in VAT was possible, while some relief had to be given to workers in lower tax scales. The ANC has also to fund the Reconstruction and Development Programme, to begin to deliver to its constituency, which includes workers, the unemployed and the poorest of the poor in rural
As Oosthuizen points out, there is no pressure group to care for the interests of the skilled worker.
On the other hand, De Kock points out that an income that can be categorised as middle class in terms of the First World, is wealthy in South African terms.
‘Third force’ links haunt top cop
The new police commissioner of the Western Cape is having to defend himself against accusations that he was linked to third force activities, writes Stefaans Brummer
A CRUCIAL paragraph in the Goldstone Commission’s “third force” report is at the centre of a storm surrounding former Security Branch policeman Andre Beukes’ appointment as Western Cape police
Lieutenant-General Beukes has, since the announcement of his appointment earlier this month, spent an inordinate amount of time countering accusations he is unsuited to the job because of his security background — which included the facilitation of false passports and identity documents for people like former Vlakplaas commander Eugene de Kock, who is on trial on more than 120 charges ranging from murder to fraud.
Beukes has publicly admitted to organising the passports De Kock, Craig Williamson and others used in 1982 when they bombed the London offices of the ANC; this week he acknowledged to the Weekly Mail & Guardian that he had handled the police liaison with home affairs to issue false identification documents until 1992; that after 1990 he had helped some of those later implicated in “third force” crimes get false documents; and that he had attested as commissioner of oaths an application for the renewal of a false passport for De Kock in January 1992.
But Beukes absolutely denies having known De Kock and his band were up to anything illegal. “I give you my absolute, honest and irrevocable assurance I never knew anything at all of any of the activities for which Eugene de Kock has been charged … I am unhappy and disappointed in the actions of De Kock and those
Beukes says he knew of no wrongdoing, that in organising false identities he was only doing what gets done in “any intelligence agency in the world … like in fiction”.
This is what he is up against: Judge Richard Goldstone paraphrased testimony from “Q” on third force crimes in his March 1994 report as: “When the Vlakplaas unit was disbanded in the aftermath of the CCB expose, the members of C10 were transferred to other units of the SAP. Some of the transferred members as well as others who are no longer in the SAP continued and still do operate in hit squads. The members were all given false identity documents and passports. These were arranged by Brigadier Beukes and Colonel Cronje of SAP headquarters in Pretoria.”
It is common cause the false identities were used in the commission of crimes. Can Beukes — who was staff officer in the Security Branch (later Crime Information Division) select headquarters intelligence unit — seriously claim not to have known what “rogue” colleagues were up to?
Not entirely, says a former colleague of Beukes: “All these people knew most of the time. I cannot say he knew all the details all the time, but it is obvious he would have known some things.”
Beukes’ defence: Goldstone’s paragraph is ambiguous and could even be interpreted as should he have given false identities to non-police members of hit squads. But he made full reply to Goldstone in affidavits, which shows he was open about his role. He says the Branch and its successor organisations subscribed to the “need-to- know” doctrine to safeguard agents, the police (and by extension himself).
Apart from that, all Beukes can do is give assurance upon assurance that he is a “professional policeman” repulsed by the type of act De Kock and others stand accused of; that he believes their actions “did the police morale and fibre immeasurable harm”; and that he did not know.
The members of the selection panel who decided on Beukes’ appointment were prepared to accept his assurances. The panel consisted of national Police Commissioner George Fivaz and his deputies, the nine provincial MECs for safety and security, a couple of foreign police experts, and Azhar Cachalia, a human rights lawyer who represented Safety and Security Minister Sydney Mufamadi.
Cachalia says the selection was not intended as a cross-examination, and the Goldstone allegation had not been specifically discussed with him, but that his past had been an issue. “I asked him if there was anything from his past that would be embarrassing to the government or the new police service. He said, to his credit, that he would be prepared to go to any truth commission and talk about his past, and that he was happy there was nothing that implicated him in any criminal activity.
“He realises if something comes out later it would amount to material non-disclosure, and that we could dismiss him on those grounds.”
Beukes does have a “nice-guy” air about him, as some of his harshest critics have acknowledged. He has gone out of his way to assuage criticism, and this week appeared before a hastily-convened assembly of perhaps 30 NGOs and human rights organisations in Cape Town to answer
He does have a disarming manner. Meeting the Weekly Mail & Guardian in an airport hall for an interview, he greeted our photographer in fluent Zulu. And when a deaf man asked for R5, Beukes was the one to find the donation. But when an air commuter sauntered by and remarked: “Don’t believe a word he says; all politicians are alike,” the affable manner dropped momentarily. “Who’s that man? What’s your name!” Beukes shouted after him in true police style.