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Call for taxes to be lowered, rather than increased for economy's sake

Saica is making submissions in Parliament during public hearings on the Mid-Term Budget Policy Statement unveiled last week by Finance Minister Tito Mboweni.

FILE: Dr Sharon Smulders of Saica said just 544,000 people pay the 52% of total personal income tax collected, less than one person in every 100 of the population. Picture: stock.xchng

CAPE TOWN - The South African Institute of Chartered Accountants (Saica) has called on government to lower tax rates rather than increase them.

Saica is making submissions in Parliament during public hearings on the Medium-Term Budget Policy Statement unveiled last week by Finance Minister Tito Mboweni.

At the time, Mboweni hinted that further tax hikes were likely when he delivers his budget in February.

But Saica said this could see the government facing an even bigger shortfall in revenue collection.

Saica's Dr Sharon Smulders said just 544,000 people pay the 52% of total personal income tax collected, less than one person in every 100 of the population.

She said many were highly skilled, high net worth individuals were easily able to emigrate, which would cause both a brain drain and a narrowing of the tax base.

“So, what we should be doing and it seems absolutely counter-intuitive, we should be lowering the tax rates. I know it sounds absolutely crazy and out there, but our taxpayer base is overburdened and dissatisfied, and increasing [taxes] now is just going to reduce compliance and payment of taxes.”

Smulders said South Africa was already past the peak of the Laffer curve, the point where tax increases reduce, rather than increase, revenue for the government.

She also said there was no scope to increase corporate income tax from a relatively high 28% without putting the economy and foreign direct investment at risk.

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