The biggest grudge payment for most people is the one they make to the taxman. And taxpayers would be even more irritated by the process if they realised that stealth taxes virtually double the ordinary person’s tax bill each year.
Kay Walsh, the economist at Deloitte, has done an exercise to demonstrate how much is siphoned off in levies, tariffs and taxes to fund the various levels of government – apart from individual income tax.
A hypothetical Jody Blogs, who earns about R24 000 a month, has an average tax rate of about 17.5 percent a year. But when the array of levies, tariffs and other taxes (including VAT) is added to the sum, her effective tax rate climbs to more than 33 percent.
Her income tax for the year amounts to R40 300, on a taxable annual income of R230 376 – a figure which excludes earnings below the tax threshold of R57 000 and after tax rebates for a person under 65 years of age.
But she also pays R25 800 in VAT on her purchases; while other items add R13 700. These include fuel levies, a Road Accident Fund levy, vehicle taxes (including customs duty, luxury vehicle tax and CO2 emissions tax), sin taxes, an electricity levy, water and other services. Combined they push the total paid out from R40 300 to R79 000.
“To arrive at the average taxable income for an individual income taxpayer for the 2011 year of assessment, we took the average taxable income in the 2008 year of assessment and inflated this to 2011 income levels using Andrew Levy’s average wage settlement rates. On the 2008 figure we applied the average wage increase per individual for the 2008 to the 2010 years of assessment to get to an average taxable income for the 2011 year of assessment.”
Walsh then made a number of assumptions, including that Blogs is in the top 20 percent of spenders, that she lives in Johannesburg and pays rates to the City of Joburg, that she travels 2 000km a year on national highways around the city, that she owns a property valued at R1 million and that she drives a B segment car with a 1.3 litre engine.
“Finally, with regards to VAT, we assumed that the taxpayer only spends 3 percent of her expenditure on zero-rated basic foodstuff. This means 97 percent of spending will be subject to VAT at 14 percent.”
She assumed that Blogs does not save beyond contributions to a pension fund and that she spends all her taxable income.
Citizens, unsatisfied with government services, claim they pay even more to private providers – for health, for education and for security, among other things.
However, Walsh said the calculation would be too subjective. People who pay for these services privately can do their own calculation. - Business Report