12% tax hikes for the Basic Income Grant Proposals

A universal income grant to the working age population

‘The Green Paper suggests that a #basicincomegrant should be launched at a level “that will at least lift the individual out of poverty”.

It also favours a universal grant instead of one that is means tested.

“Administratively, it is a lot easier for SARS [SA Revenue Service] to recoup the grant paid to a wealthy individual with a technical adjustment to the tax brackets than for #Sassa [SA Social Security Agency] to interview millions of applicants to determine whether the applicant qualifies based on income. A universal grant is therefore potentially more efficient, cost effective and better targeted resulting in fewer exclusions,” the paper says.

“The key benefit of universal benefits is that it promotes social solidarity and buy-in to the system; and it is administratively much simpler to administer with fewer exclusion challenges. It reduces stigma of the poor and discontent amongst the wealthy who feel that they are the ones funding the system.”

It says that the country’s tax system is “significantly more advanced” than Sassa, “hence relying on the tax agency ability to test income is likely to be a lot more effective than through Social Security Agency.”

“It will also be much easier to implement a reform that will require a significant adjustment to taxes as it willbe easier for government to sell an increase in taxes on the working age population with an increased transfer to that same population.”

Link: https://www.news24.com/fin24/economy/south-africa/new-govt-plan-wants-south-africans-to-pay-12-of-their-earnings-into-state-managed-fund-20210818

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