Godongwana’s words

In an interview with the SABC last week, finance minister Enoch Godongwana said: “No government runs out of money when they can tax people any day. If we were running out of money, we would have increased taxes.” Given the country’s low to middling growth prospects, Godongwana’s words may well prove prophetic.

With personal and corporate income tax accounting for 51.1% of all government revenue, the various pressures (additional costs to mitigate failures in electricity, water and safety provision on the part of the state) could chip away at that available tax base.

About 95% of all income tax is paid by 30% of taxpayers; of all corporate income tax, 97% thereof is paid by 3.5% of companies. In this context, messages and signals sent by Godongwana, the National Treasury, the SA Reserve Bank and government need to be carefully considered and weighed before they are made.

Godongwana stated that government would have increased taxes if it was running out of money. But in the 2024 budget speech the minister said: “Revenue is mostly raised through personal income tax by not adjusting the tax brackets, rebates and medical tax credit for inflation.”

Is this a case of a simple mistake? Or something more along the lines of a sleight of hand, trying to avoid the negative reaction from highlighting that, semantics notwithstanding, taxes were increased?

With inflation remaining stubbornly high — partly due to supply-side drivers of higher business operating costs and increased food and fuel prices — SA’s taxpaying base is under severe pressure. Godongwana, and government officials more widely, risk undermining trust in the state, leading to lower tax compliance and, over time, phenomena such as tax evasion and tax revolts.

Chris Hattingh

Centre for Risk Analysis