Guiding consumers since 2009

'Tax freedom day' begins on May 12 vs May 10 in 2007

By Staff Writer

'Tax freedom day' begins on May 12, two days worse than the May 10 of last year and thus indicating that the overall tax burden has increased despite consistent tax relief being announced.

Tax freedom day is the day on which the average South African taxpayer has earned enough money to cover this year's tax bill and can start spending money on himself or herself. In effect the total earnings of the average South African taxpayer from January 1 2008 to May 11 2008 is equal to the total taxes that they have to pay for 2008.

The Free Market Foundation (FMF) calculates this day annually by using gross domestic product and total taxes paid. These taxes include most of the 21 taxes levied in South Africa as identified in the PricewaterhouseCoopers' total tax contribution project.

A move out by two days means that the overall tax burden has increased, taking the additional day in the leap year into account, despite the Minister of Finance consistently reducing tax rates in his annual budget speech over the last few years. This extension of two days, despite significant tax relief, may be explained by changes in the tax laws such as limiting deductions or exemptions. It may also be due to bracket creep or fiscal drag as a result of the inflationary effects on income earned, explains the FMF.

According to Garth Zietsman, who was responsible for the calculation: "This means that 132 days have been spent working for the government and only from May 12 individuals start working for themselves and their families and have the opportunity to decide what their discretionary spend is. This spend can vary greatly between families but may include improvements to the house, that new car, a holiday or simply saving amounts for the trying times that may lie ahead."

"South Africa was rated at 5.6 out of 10 in the size of government category (of which tax is a component) in the latest Economic Freedom of the World ratings," adds FMF director Eustace Davie. Davie adds that SA ranks 89th out of the 141 countries rated in the study.

This size of government category measures the extent to which a country relies on choice and markets rather than government budgets and political decision-making. "South Africa could achieve higher growth rates by reducing taxes and government involvement in the economy," he said.

Tax freedom day in the US fell on April 23 this year while in Australia it was April 24.

The concept of tax freedom day was developed and copyrighted in 1948 by Florida businessman Dallas Hostetler, who calculated it each year for the next two decades in the United States. In 1971, Hostetler retired and transferred the copyright to the Tax Foundation in the US. The copyright in South Africa is owned by The Free Market Foundation, which calculates this day every year.

Recent Articles

Featured Debt counselling – the two sides of the coin

Being overindebted doesn’t just put a strain on your personal finances; it also puts a strain on your state of mind. The best solution is to start the process of debt counselling so that you can escape the debt cycle. But what are the ups and downs of joining this debt relief programme?

Travel ban – how to claim for the loss incurred

As with the recent Covid-19 pandemic, governments sometimes issue travel bans to prevent people from travelling to other countries. This becomes even more complicated if you’ve already planned and paid for your trip. Your flights will be cancelled, and you may lose money from cancelled accommodation arrangements. How do you claim for the financial losses incurred due to a travel ban?

How to finance and insure a second-hand vehicle

Buying a second-hand vehicle may suit your budget better than acquiring a new one. But what impact does an older model have on vehicle finance and car insurance? We reached out to specialists in the field to explain what the financial implications are of pursuing a second-hand vehicle.

Reading your loan agreement: look out for this

Many people don’t read their loan agreements. They just sign on the dotted line without realising that they could be signing their lives away. But it’s important to review your loan agreement before and after taking your loan to avoid future setbacks.

 

Deals

Udemy online course for R180

Price: R180
When: Until 27 March 2020
Where: Online

Educate your kids for free with Skills Share

Price: Free
When: Daily
Where: Online

Take advantage of payment holidays from Standard Bank and Nedbank

Price: Free
When: From 1 April to 30 June 2020
Where: Nationwide