23 August 2022
BJC calls for bold action from government to address socio-economic crisis
The Budget Justice Coalition (BJC) recently made a submission to the National Treasury on the 2023 Medium Term Expenditure Framework (MTEF) which is accessible at BJC - FOA Submission on the 2023 MTEF.
The BJC argues that the current macroeconomic policy framework is not geared towards sustainable and inclusive development. The BJC believes that human rights realisation should be at the centre of the country’s macroeconomic policy framework and that the government must take bold steps to drastically lower levels of poverty, inequality and unemployment in South Africa. Government and big business contend that this is not possible given a growing debt problem and a lack of fiscal space.
South African fiscal policy must ensure that debt management does not come at the cost of regression in the fulfilment of socio-economic rights, the undermining of state ability, and further deterioration of public infrastructure. Progressive taxation must now be used to reduce debt service costs and raise revenue for Universal Basic Income Grant (UBIG) and other socio-economic priorities. This must include capitalising on the commodities boom and tax overrun to expand social and economic support. In April for instance, preliminary results for tax collection in 2021/22 showed that collection is R16.7 billion above the Treasury’s estimate. In addition, commentators have estimated the collections to be between R50 Billion and R100 billion higher than Treasury’s forecast for 2021/22.
Moreover, the BJC proposes increasing the tax-to-GDP ratio. Between 1996 - 2020, the tax-to-GDP ratio averaged 24%. This is 41.6% lower than average annual revenue-GDP ratio for OECD countries - which averaged 33.5% in 2021. Economic modeller Asghar Adelzadeh, says “government’s decision to avoid permanent tax increases in the overall tax burden has significantly benefited the country’s well-off class at the expense of the majority.”
As detailed in BJC’s submission - the Alternative Information and Development Centre (AIDC) has demonstrated that just by taxing high income earners at the same effective tax rate (with respect to their “living standards”) that they were taxed in 2000 could raise between R145 - R160 billion more in revenue each year. In addition, the Institute for Economic Justice (IEJ) has presented a range of financing options which could be instituted to ensure support to the most vulnerable. A wealth tax on the wealthiest 1% of the population could raise R143 billion according to researchers at the Southern Centre for Inequality Studies. The IEJ has shown that a VAT of 25% on luxury goods would raise an average of R9 billion annually. Collectively, these revenues and other sources of income, for instance a reduction in wasteful and irregular expenditure of up to 30% of the R166 billion reported by the Auditor General in 2021, could easily finance a UBIG at the Food Poverty Line necessary to mitigate against increased hunger and the cost-of-living crisis.
On the 24th August 2022 a wide range of movements including both South African Federations of Trade Unions (SAFTU) and Congress of South African Unions (COSATU) are embarking on a National Shutdown. The mobilisation is part of a campaign “to defend and advance the socio-economic interests of workers and the working class at large”. This is an important initiative that highlights, once again, the failures of government’s economic policy in dealing with mass unemployment, deep inequalities and the crisis of hunger in the country. This socio-economic crisis is worsened by the government’s austerity policies. The BJC invites National Treasury and other stakeholders to engage thoroughly with our submission in the interests of developing a MTEF that responds meaningfully to this crisis and in order to better realise constitutional commitments.
About the BJC
The purpose of the BJC is to collaboratively build people’s understanding of and participation in South Africa’s planning and budgeting processes – placing power in the hands of the people to ensure that the state advances social, economic and environmental justice, to meet people’s needs and wellbeing in accordance with the Constitution.
The organisations who make up the BJC are:
350.org, Alternative Information and Development Centre (AIDC), Amandla.mobi; Black Sash; Centre for Child Law at the University of Pretoria, Children’s Institute at UCT, Corruption Watch, Womxn and Democracy Initiative at Dullah Omar Institute UWC, Equal Education, Equal Education Law Centre, Ilifa Labantwana, Institute for Economic Justice, Legal Resources Centre, Open Secrets, Public Affairs Research Institute, OxfamSA, Pietermaritzburg Economic Justice and Dignity Group, the Public Service Accountability Monitor, Rural Health Advocacy Project, SECTION27, Social Policy Initiative, and Treatment Action Campaign
Issued by the Budget Justice Coalition
23 August 2022
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