SA headed for 'biggest tax rate increase'

Government’s proposed carbon tax – due for implementation in July next year – will result in one of the biggest tax rate increases in South Africa, economist Mike Schussler said last week. “Other than the three big taxes – personal income tax, company taxes and value-added tax (VAT) – the only other tax likely to be bigger, at least at the lower carbon tax rate, is fuel tax.” Schussler believes government should be looking at the economic, environmental and social impact of regulations and new taxes before they are introduced. Speaking at the Special Interest Group (SIG) Transport Forum in Johannesburg last week, Schussler expressed concern that new regulations – including the recent truck banning proposal and the carbon tax – would cut into South Africa’s gross domestic product (GDP) margins and considerably add to already high logistics costs. He says the logistics industry already operates on only a 4% profit margin. “Certain regulations, including those mentioned, would simply force more trucks on the road to cope with constrained conditions,” said Schussler. He points out that SA has a very high tax to GDP ratio. “This is not just a function of inequality but also a result of high taxation levels.” The current world average is 14.4%, with South Africa recording almost double that at 27%, according to latest statistics by Schussler’s company, Economists.co.za. He commented that the current carbon tax would not be ring-fenced and would thus go into general Treasury coffers. “It is therefore not too much of a stretch to say the additional revenue would not be spent on improving road or other logistics operational efficiencies but rather on increased public servant salaries which continue to escalate,” said Schussler. In a cost-conscious environment, adding another tax may just kill the goose that lays the golden egg. – Mark Schussler