Very few of us take the time to sit down, and really consider what our country’s annual budget means. We take notice of the tax increases, and how much more our fuel will cost, and our tipple and smokes. We already make little calculations in our minds on how we will have to adjust our personal budgets to make ends meet.
We would like you take a few quiet moments, and really consider what all of technical data means, and what we, as individuals, will have to do to in order to safeguard the financial future of our country.
The total budget for the coming year – the money needed to keep government function is R1.95 trillion. The money the government expect to collect through the various taxes is R1.58 trillion. The shortfall that will have to be gotten through other means is R370 billion.
The budget highlights are on our website, Facebook and Twitter accounts. The full information booklet for the 2020/2021 tax year is available on our website.
Up to now SARS has been lenient regarding offences of the Tax Administration Act. Taxpayers must expect stronger enforcement from SARS when it comes to compliance offenses in order to collect more tax.
Out of all the different taxes collected by SARS, the tax on individuals account for 38.3% of all the taxes collected.
There is just short of five million individual taxpayers in the country, out of 50 million inhabitants.
Of these, only 700 000 earn more than R350 000 per year.
1.9 million taxpayers pay about 80% of the total tax collected from individuals.
The total taxes collected stacks up like this:
All of the above must compel every individual taxpayer in the country to give some very serious thought to our situation, because it is clear that this situation is not sustainable. 10% of the population simply cannot afford to finance the rest of the country of 50 million people.
Tax as such may not be the reason that many of the top income earners are leaving the country, but what they get in return for their tax contribution may play an important part, eroding the tax base further.
As a country we simply cannot afford our porous borders anymore. We have goods entering our country without complying to the tax laws – both VAT and customs revenue are being negatively affected.
It is time that we, as a country, consider voluntary austerity, before we are subjected to enforced austerity, as had happened to some European countries a few years ago. As our county, our personal debt sits at R1.7 trillion rand. That is almost as much as our national debt, and almost the same as the total spending budget for the country. Once again the situation is not sustainable. More than 60% of households spend more than 70% of their monthly income to service their debts only. Combined with the bad news this budget brought, it cannot be a situation we can allow to continue.
There are two serious implications brought about by this situation. Firstly there is very little formal personal savings. No savings equate to financial institutions not having enough funds to stimulate the economy through loans for businesses. Secondly the sheer amount of personal debt exposes financial institutions to increased risk of bad debts. If the money that is owed cannot be collected, the stability of our financial institutions will be compromised, leading to more downgrades from international debt reviewers, and in turn to less investment in our country, which will incur even more of a tax-burden for individuals to carry.
It has become time to ask yourself whether you are buying things that you want, or buying things that you need. That old television will survive another year or three, no one needs a 70-inch TV when a 36 inch will do. Your luxury German or Japanese car mostly takes only one person to work for more than 80% of the time. Do you really need a luxury, fast car, that you can only drive at the legal speed limit, transporting only yourself most of the time? It really has become time to review our personal financial lives.
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Remember, Legal&Tax Services is your caring companion, providing expert advice and assistance in all money matters.
Contact us for advice on tax, debt and budgeting.