Grow private sector

Geoff Jacobs, president of the Cape Chamber of Commerce and Industry

When only three million South Africans out of a total population of 56 million pay 38% of total tax revenue through their personal income tax, it should be obvious that the government needs to do everything it can to grow the private sector so it will employ more people, and make profits on which taxes can be levied.

It makes no sense at all to expand further the numbers employed in state-owned enterprises or to boost employment at all levels of government.

That may raise more personal income tax, but it would also be counterproductive.

The latest tax data released by the National Treasury and the South African Revenue Service (SARS) shows that very few South Africans are carrying much of the tax burden through personal income tax (38%), and therefore the costs of running the government, with private companies being the third-largest taxpayer (16.6%) and Value Added Taxes raising the second biggest amount (25.2%) to the Treasury.

What is particularly significant about private company tax contributions is that thanks to the poor state of the economy, which has been exacerbated by the abysmal performance of Eskom and other state-owned enterprises, private companies are struggling to make a profit. At the same time, tax revenues have grown faster than the economy.

According to SARS, less than a third of private companies showed a profit last year. The rest of the private sector companies that submitted returns made none or lost money and paid no company tax at all.

As South Africans anxiously wait to know what additional taxes the government will impose in the coming financial year, employers in the private sector, where making a profit is crucial to survival, are praying that the Minister of Finance will resist measures to make doing business in South Africa harder than it is already.

In his new budget, the minister should remember that a successful tax-paying business sector requires a stable, thriving society where private property is protected and encouraged, where crime is kept at a minimum, where government employees (and politicians) regard themselves as public servants, where the tax system encourages investment and economic growth and, most of all, where electricity is reliable and affordable.