Revenue at tipping point

Hilary Joffe’s article on tax revenue was a timely reminder of just how precarious our fiscal situation is (Gigaba could end up reducing revenue if he increases taxes, October 24). The Laffer curve she refers to partly relies on marginal propensity theory — in this instance, the marginal propensity to pay tax. Simply put, tax rates can increase to such a level that further tax increases result in a decline in revenue.

This is where SA is right now. There is no more tax revenue to be had from this economy or the people of SA. No tax hike or new tax will alleviate our mostly self-inflicted and growing budget deficit. Any increase in any one of our many taxes will surely result in a net decrease in tax revenue over the short term.

Add to this the plummeting willingness to pay tax due to the capture of the ANC and the rampant and rapidly institutionalised corruption this has wrought. This puts Finance Minister Malusi Gigaba in a very tight spot. Public debt has doubled under President Jacob Zuma and government consumption takes up an everincreasing proportion of total tax income. We move ever closer to the Greek euro tragedy.

The effect of all of this on the capital markets, and especially the ratings agencies, is not going to be good. As the finance minister, Gigaba simply does not have the gravitas of his predecessors, Pravin Gordhan and Nhlanhla Nene. There are simply too many questions hanging over both his ability and his independence. To the finance world, he unfortunately has the Marthinus van Schalkwyk factor — a nattily dressed Kortbroek!

Paul Jackson

Parkview