BY Rentia Mahoney
In an already strained economy with interest rate hikes and inflation increases it would be greatly beneficial for any taxpayer to receive some form of tax relief. With an estimated 6.2 million taxpayers, it would seem that South Africa’s tax base is growing comfortably. However, since less than 5m of these registered taxpayers actually paid tax, the figures soon start to appear smaller than meets the eye.
In his Sona address, the president said: “Rather, we are concentrating on those issues that concern South Africans the most: load shedding, unemployment, poverty and the rising cost of living, and crime and corruption.
It would therefore be beneficial to government for the 5m South Africans to also pay their taxes, provided certain rebates or deductions are provided to these individuals.
From promises to action, please Mr, President, here are a few suggestions:
South Africa’s unemployment rate is among the highest in the world. The domestic worker sector poses an opportunity to create sustainable employment, and to date, many people still find employment as domestic workers in the country. This presents an opportunity for the government and the South African Revenue Services (Sars) to recognise the valuable contribution the employers of domestic workers make to creating employment.
With such recognition, the government and South African Revenue Services (Sars) should reconsider the negative test of the Income Tax Act under Section 23, which prohibits and limits the deduction of the cost of maintenance of the taxpayer that is full-time salaried unless the home of such a taxpayer is regularly and exclusively used for the purpose of trade.
The initiative, in this regard, has already been indirectly implemented by the government in that the Sars has already made the employers of domestic workers responsible for the collection of the Unemployment Insurance Fund (UIF). Similarly, they should allow a claim of the wages paid to domestic workers to be a tax relief to their employers.
Attempting to engage the government on the policy level.
The overall aim for consideration is to determine how the tax relief of a domestic worker wage would contribute to job creation and how will the tax relief benefit both the employer and employee. Tax relief has immediate results as it increases the disposable income of the taxpayer and increases the affordability of goods and services, which in turn stimulate economic activity (Altman, 2007).
Tax relief to employers of domestic workers could be seen as a clear illustration that job creation filters all policy considerations. This tax relief consideration creates a platform for debate and negotiation that can be interpreted to specific country dynamics.
A rebate or deduction on domestic workers’ salaries.
There are currently 1,124 000 domestic workers employed, according to Statistics SA (2021: 1,130 000). If this number is multiplied by the minimum wage of R 4,000 per month, we arrive at a number of around R 53,9bn per annum for the domestic sector. If a deduction of 25% is allowed in terms of the Income Tax Act, we arrive at a number of R 1,2bn as a possible monthly deduction for taxpayers. This is an enormous saving for taxpayers. These numbers don’t even include gardeners, which should be treated in the same way. This deduction was already proposed as far back as 2012.
The country’s chronic energy crisis, most evident from the frequent load shedding, largely stems from the failure of the national power utility, Eskom, to provide reliable, constant power supply due to its ailing coal-powered fleets and insufficient maintenance of the transmission and distribution network.
The poor condition of South Africa’s national Transmission and Distribution network makes it prone to frequent unscheduled breakdowns, theft, and vandalism. The industry is looking at alternative backup power sources, such as diesel-powered generators, to avoid further operational losses.
South Africa’s primary need for diesel gensets lies in standby applications for industries and businesses, not prime power use. A genset is a combination of a prime mover (typically an engine) and an alternator. The electricity grid is generally stable, with demand linked directly to load shedding. The country has no direct manufacturing of diesel generators and heavily relies on the import of engines, alternators, or complete gensets from international markets.
While population growth, higher living standards, and increased industrial/mining activity drive demand for diesel gensets, alternative technologies such as renewable sources (wind, solar), battery energy storage systems, and gas generators are increasingly popular, restraining the diesel genset market growth.
However, alternative distributed energy resources are, to date, more expensive than diesel gensets and are forecast to remain in the next five years. There are many opportunities for genset distributors to overcome market restraints through innovative customer services and the ability to adapt and enter new market opportunities.
A rebate or deduction for taxpayers relating to costs incurred for solar panels, inverters and generators is suggested. The energy crisis has placed a heavy burden on individuals to operate at maximum capacity for work purposes and income generating activities, both for individuals and companies. Small energy saving devices should be written off in one year, and larger devices or equipment should be allowed to be written off over two years.
Mahoney is an independent analyst.
* The views expressed do not necessarily reflect the views of IOL or Independent Media.
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