Finding solutions for South Africa's tax conundrum

POLICY PERSPECTIVE

- Theo Boshoff

As the old adage goes, there are only two things that are certain in life: death and taxes. As social contract theory goes, individuals give up an element of freedom (and money) in exchange for security, services and harmony in society.

In other words, we pay taxes so that we can get services such as infrastructure, safety and social security. An element of cross-subsidisation is inevitable, but it contributes to the overall stability of society.

This logic has been diluted of late. Government services have increasingly moved towards a ‘user-pays principle’, and taxes are increasingly being used as a punitive measure to change behaviour.

CARBON AND SUGAR

The two examples of this punitive approach that come to mind are the Carbon Tax Act (No. 15 of 2019) and the Health Promotion Levy on sugary beverages.

The Carbon Tax Act attaches a price to greenhouse gas emissions. The logic underpinning the Act is that companies will do everything in their power to mitigate their greenhouse gas emissions, as emissions will have a direct impact on their balance sheet.

The Health Promotion Levy increases the cost of beverages with a high sugar content in an attempt to mould consumer preferences towards healthier options.