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Struggling to cope, South Africans can’t afford tax increases - Outa

The government is battling lower revenues and rising debt in a recession-hit economy.

Picture: freeimages.com

CAPE TOWN - The Organisation Undoing Tax Abuse (Outa) says South Africa has reached the point where raising taxes won't bring more money into state coffers because people can't afford it and will avoid paying.

Outa was briefing Parliament's finance committees at a joint hearing on the Medium-Term Budget Policy Statement released last week.

The government is battling lower revenues and rising debt in a recession-hit economy.

Outa’s Matt Johnson says the government can increase taxes to a certain point where people are still willing to pay, but any higher and revenue will fall because consumers can no longer cope.

“And we believe we’ve entered that stage, where people can’t really afford to pay more taxes. So even if taxes are increased, as with VAT, people will do as much as possible to avoid paying.”

Johnson says at tax levels that applied between 2014 and 2017, a 1% tax hike generated only 0.05% in extra, real tax value.

He says it isn’t so much the size of the government’s debt that concerns ratings agencies and credit providers, but the limited scope for raising more revenue through taxes in order to pay it down.

(Edited by Shimoney Regter)