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The higher tax for people earning more than R1,5 million predictably came about. Once again, the government was too scared to tackle VAT, which is exactly the area they do need to tackle. Like government employees and taxi owners, VAT has become one of those untouchable subjects. I understand that anybody not earning R1,5 million a year is obviously going to think, “Great, let the rich pay – they can afford to.” I understand that thought process, but the problem with that is, with nobody really complaining about this, it is only the start of what is to come.
One has to think very carefully, although this argument is routinely ignored in failing economies, about chasing away all your successful people and one must not forget that countries like America have a tax rate of 26%. That is not going to help any lawyers in South Africa, but let us take our leading neuro-surgeons or orthopaedic surgeons – they are wanted everywhere, and they can go everywhere and right now we have just put a little bit more disincentive for the leading experts to stay in South Africa because we have just increased their tax a lot more. They have gone from 41% to 45% and although it sounds like it is only 4%, it is effectively a 10% increase for them and means that they will get about 10% less income per month than they used to. It is not something that is going to excite them and I don’t believe that that is the end. We see France with a top tax rate now of 70% and that has already led to many top business people leaving France, and if South Africa continues to increase the tax rates on the wealthy, who are invariably the successful, it will just chase away more of those people.
I am always a firm believer in paying tax and giving your share to society, and I don’t think that people who earn almost nothing should have to pay tax, but it is also not a recipe for success if you decide that 103,000 people in your country earn more than R1,5 million a year and that they will carry the tax burden of the country because you are encouraging those 103,000 people to consider other options.
Do not be surprised of next year you see a further hike in that new wealth tax – not to mention the fact that dividend tax was increased from 15% to 20% and people don’t appreciate that in many businesses, that is how the business owner is paid. A 5% increase does not sound like much, but when you put 5 over 15% it means that that tax has just gone up 33% alone in one year! We already have a lot of disincentives for people to do business in South Africa – BEE, the CCMA and our ridiculous regulations of each and every part of society and we are increasingly targeting the same people – the people who own businesses, who employ people and who generate revenue for the economy and taxes for the Government. We must be very careful how much we slowly throttle them because, while nobody wants lawyers, just about every country is quite happy to take our engineers, our builders, our architects, our doctors, etc just as many years ago we lost a large percentage of our nurses and teachers to Dubai, Australia and the UK.
Posted by Michael de Broglio on Wednesday 15-Mar-17
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Comments
Cornelie said:
on Monday 03-Apr-17 03:02 PM
The tax man is killing us every moth. One of these days it will only be the poor living in south africa and all the others will be moving over seas it is just to costly living in S.A not that it is much better else were but at least you know where your tax and VAT is going.
Lourien said:
on Wednesday 29-Mar-17 05:52 PM
I don't believe that the government should keep on increasing the taxes, they only take and don't give anything back to the country or its people, most of the roads are not looked after, robots are out on every corner, our Hospitals and services are lacking and in a bad state. Bigger and better parties are arranged for our president and their pockets are filled while everyone else is paying high prices and taxes, struggling to make a living. Even when increasing the high income earners taxes will only postpone our taxes as that will be increased because they will always want more. So much money is being wasted in corruption, why don't they stop corruption and money laundering and reduce taxes?
Tersia said:
on Friday 24-Mar-17 09:04 AM
I didn't even think about it like that. My sister that lives in New Zealand mentioned to us that we wont even believe how many South African people are there, Afrikaans speaking people. If the country you live in makes it unbearable for you to stay then you don't really have another choice to go look for greener pastures. I also think it's going to happen more and we are going to lose our best people and be left with the second or even 5th best to perform surgeries and run companies. It will cause a major downfall for South Africa. Our Government really did not think that one through!
Prishani said:
on Thursday 23-Mar-17 05:12 PM
I don't think that this was the best option. I think it has upset many people, most of whom are key players in our country, such as doctors, engineers and other business owners. We must not forget that many of these professionals will not put up with this and leave the country. This in turn will have a far more devastating effects in the future. I have no doubt that many professionals are already making plans to leave the country and use their skills elsewhere.
Alexis said:
on Thursday 23-Mar-17 08:29 AM
I see us losing a lot more with this increase. I honestly do not understand what the Government is trying to achieve here
brumilde said:
on Wednesday 22-Mar-17 01:34 PM
We cannot be compared to America, we are a third world country and they are 1st... they have tried and tested and have a semi stable economy. we can only hope to learn from them and see their mistakes... eg their medical care system is terrible compared to what we have here
Mathilda said:
on Wednesday 22-Mar-17 01:08 PM
Because of this I think more "rich" people will consider leaving South Africa and I don't blame them
45% of your salary that is ridiculous, they work hard just to pay more than half of their salaries to the government
Liesl said:
on Wednesday 22-Mar-17 11:21 AM
The increase of tax has been quite a hot topic. Just after it was announced it was discussed on 702 and the general public is up in arms about it
Angelique Jurgens said:
on Monday 20-Mar-17 03:33 PM
Like most comments on this blog I agree that all the specialists and great doctors or wealthy people are simply going to get fed up and leave. People always throw in comments like well then there will be more job openings... no - what are we meant to do in the interim? They cannot put all the burden on the people our country needs! I would be highly annoyed if I fell in that tax bracket - more tax evasion is possibly going to occur.
Liz said:
on Monday 20-Mar-17 09:54 AM
This tax increase is unfortunately a sure way of driving away our countries skilled workforce, who will undeniably take with them multiple job opportunities and the prospect of economic growth in South Africa. However, if tax payable by the poor and middle class were to be increased this would lead to major upheavals.
Daniella said:
on Friday 17-Mar-17 05:32 PM
I think a lot of the wealthy are going to leave the Country which is going to be a huge problem. Also if our government used the money from our taxes wisely and used it to better our Country a lot of people wouldn't mind then.
Sarah said:
on Friday 17-Mar-17 03:02 PM
I don't mind paying taxes if we can see where the money going but in this country we never see the money go to schools, hospital etc.
Tamaryn said:
on Friday 17-Mar-17 02:11 PM
Unfortunately, I think this will be the deciding factor for many South Africans who have been considering immigrating. Implementing wealth tax to this degree is only going to open the flood gates. Another country will gladly accept the skilled, hard-working doctor/nurse/builder, all of whom SA would be wise to promote staying in South Africa, as opposed to leaving.
Henrietta said:
on Friday 17-Mar-17 12:03 PM
45% is a huge portion of one's salary. This is almost half of what they earn, that's bad. It really is true what you saying in this blog, this may lead to to the educated to leave the country for better option. It's not really encouraging them to stay and this could lead to huge disasters, unemployments etc. I think the saddest thing is, is that we don't see improvement, the government takes and takes but to what extend.
Dune said:
on Friday 17-Mar-17 10:10 AM
Its sad to think, you work so hard for your money, and then the tax man comes and takes almost half of it. Its ridiculous, chase away the rich, leave the poor and we will be living in poverty sooner rather than later.
Ashleigh said:
on Friday 17-Mar-17 09:55 AM
I think its nonsense that the wealthy have to basically give half their earnings to Tax! Where will all this money go to? We do not see any improvements and all the government departments are always bankrupt and run down!
Zindy said:
on Friday 17-Mar-17 09:50 AM
Wow 45% ! That's really hefty. Not only did you pay for years of studying to become successful you have to pay for the rest of your life!!
Brenda Du Toit said:
on Friday 17-Mar-17 09:40 AM
It’s just amazing how the tax only increase each year.Its Scary to see how our country is going backwards everyday.
Helen said:
on Friday 17-Mar-17 08:55 AM
With a little hope that things are getting better in South Africa we are getting new changes again and these changes are not for the best! This blog is true, very high tax will chase professional and educated people away and country will have no one to manage and contribute towards growth! Can anyone see where this tax actually spent? And with the tax increase - on which areas it will be spend in the future? Our infrastructure is poor, government hospitals are crying. Does government noticing that changes has to be made and tax money must be invested!
Joyce said:
on Thursday 16-Mar-17 05:58 PM
I think it is a bad idea and is hush for successful people to get so high tax increase. I think the idea will make the country fall. I think there was no proper thought before the idea of raising the tax for successful people.
Bianca said:
on Thursday 16-Mar-17 03:39 PM
The tax increase will without a doubt drive some of our successful professionals away and will leave an extremely bad taste in their mouth when it comes to our country. How does it make sense to drive away the high earners and get stuck with a country full of medium earners and no growth of companies and new job opportunities?
Jolene said:
on Thursday 16-Mar-17 09:40 AM
I haven’t thought of the increases of tax this way, it is actually sad that the few good doctors, which we desperately need, will be cased away. It is easy to say the rich must pay until you are in the same position then it won’t be so nice anymore. I think Angelique made a good point, tax increases but there is no improvement.
Safia said:
on Wednesday 15-Mar-17 04:29 PM
This tax tactic will never work well for the country.France is an example, it is like cutting a hand that feeds you. wealthy businesses leave and more people lose jobs , more people plunge into poverty.
But for our government it is a quick solution to cover up some rot spreading in economy,it will work for few years at least.
Jadine said:
on Wednesday 15-Mar-17 03:27 PM
South Africa is heading down a dangerous path with the attitude of the richer you are the more you get taxed. We cannot encourage a society where people think that it is a bad thing to want to become very successful and prosperous because you will be penalised for it. We might as well become a Communist country! Unfortunately, until the masses awake and usher in a new presidency that looks fairly at all its citizens, we as South Africans will just have to bite the bullet and accept. So sad, but true.
Melissa said:
on Wednesday 15-Mar-17 02:22 PM
This country is going backwards everyday, you work your butt off everyday and now this?????
Thabitha said:
on Wednesday 15-Mar-17 01:06 PM
Sad and we need rich people to come to our country not leaving, it is not nice to see too many young and old people unemployed.
Sinead said:
on Wednesday 15-Mar-17 01:05 PM
When I first read about the tax I was flabbergasted!!! 45%?? That's just insane! I actually agree with you, but at the same time Gordhan had to do something... Let's just hope for the best 0_0
Angelique P said:
on Wednesday 15-Mar-17 12:25 PM
It’s just amazing how the tax only increase each year but there’s no improvement to our country. Why must we pay all of this money? Only for someone else to enjoy it. I honestly don’t know what is going to happen to this country.
Suzanne said:
on Wednesday 15-Mar-17 12:18 PM
I have never thought of it this way - a while ago, I was the person saying "great, let the rich man pay". BUT you are right, it is targeting people who actually bring an income to a lot of people and as soon as we start losing those people in our country, we are going to crash & burn even faster.
Clare said:
on Wednesday 15-Mar-17 11:48 AM
I know that Tax is important for our country to help out where we can but I cant understand as to why we pay if you never see any changes. I was listening to the Radio this morning and they where talking about our Road and the upgrades that the past government didn't maintain my question was then where is the money that was paid for the repairs that they didn't attend to?
Jessica M said:
on Wednesday 15-Mar-17 11:42 AM
I agree this is sad, maybe the people living her illegally and not paying tax need to get out, Grants should be limited and given to SA people only. A lot of other things can be done rather than driving our specialists out. HOWEVER people also leave here because they do not get paid their worth. People want top work done and pay minimal for it.
Michelle said:
on Wednesday 15-Mar-17 11:11 AM
Wow this is incredible!! 45% .... ? That is almost half of what they will earn, but I guess if you have a lot, you can give some away? If things are going this way now, how will it be in a few years?
Jessica Apfel said:
on Wednesday 15-Mar-17 11:07 AM
The fact that it is referred to as a 'Wealth Tax' creates a perception that it is right, as you said those that can afford that. However, in saying that a small percentage of the population cannot eradicate the plight of the poor perhaps we should scrutinise Government wastage to address socio-economic problems. The tax rate is excessive but Pravhin did not have much of a choice, he had to make an evasive decision and quickly! If he were to increase the tax paid by lower earnings we may have had civil unrest and we have to admit that a large number of those that will feel the 'pinch' of this income tax increase are in fact MPs!
david said:
on Wednesday 15-Mar-17 10:39 AM
clever stuff this.
tax the rich so they leave, and then?
then we can all sit in poverty...
yipee!!!
we can all have nothing together.
Nina said:
on Wednesday 15-Mar-17 10:35 AM
Very scary to see the tax going up like this. It's sad to see that despite the fact that our people are paying so much tax, we still sit with a lack of proper service delivery across the country. Can't help but wonder where all the tax money goes.
Juliet said:
on Wednesday 15-Mar-17 10:30 AM
Typical actions taken against the same group of people because this gets results. They know that this group will pay it and so they keep repeating this action of increased tax of the rich. Bleed the country dry and then blame everyone else.
Johannesburg based attorney specializing in personal injury matters including Road Accident Fund claims and medical negligence matters. My interests include golf, reading and the internet and the way it is constantly developing. I have a passion for life and a desire for less stress!
