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Something for nothing?

Friday, 22 June 2012   (0 Comments)
Posted by: Stiaan Klue
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In 1976, the Canadian Rock and Roll group, Rush, had much success with their song "Something for Nothing". The last verse in the song reads:

"You can not have freedom for free

You will not get wise

With the sleep still in your eyes

No matter what your dreams might be"

These words have a certain ageless truth to them - words that we in South Africa should seriously consider. Their meaning is clear - nothing is for free. If you want to earn a decent living then you have to work harder and smarter. Each person has to take responsibility for his own affairs. Dreams never filled anyone's stomach.

Many commentators have publically stated that South Africa is at a cross roads. With huge income disparities and a lack of service delivery we need to chart a new course - a course where each person commits to the success of the country by committing to hard and honest work. We will not become wealthier by demanding that others pay for our dreams.

100% tax for 50% service

The Public Service Commission (PSC), an institution established under section 196 of the Constitution, last week sent shockwaves through Parliament by stating in their presentation that less than 50% of tax money is efficiently managed by government departments.

The PSC based their findings on their own information, the auditor-general's reports and the government departments' annual reports. The PSC classified R3,7 billion that was spent by government departments in 2009 - '10 as unauthorized, irregular, fruitless and wasteful expenditure.

The PSC, analysed the performance of 15 strategic government departments - including health, education, police, transport, justice, public works, agriculture and land reform - and found that these departments spent 100% of their budgets but only achieved 50% of their service delivery targets.

Lack of performance means earning more

This week we heard from the new Minister of Public Service and Administration, Lindiwe Sisulu, that she will offer government civil service workers an annual increase of only 9%! The unions already rejected this offer and are demanding more. How is this possible?

Can we really expect taxpayers to pay more tax to fund a civil service that is not meeting its targets?

A grave warning

In anticipation of these higher demands Pravin Gordhan, Minister of Finance, last week stated that taxpayers' patience are running out as they are not getting value for the billions of Rands they are paying in taxes.

Prof. Richard Levin, Director General of the PSC, painted a dire picture to MPs by stating that "The civil service is doing poorly and the delivery reports show decline ... Society is losing their faith in the civil service".

Something for nothing for all!

Let's assume for an instant that those demanding more tax money for ever decreasing service delivery are correct - let's assume that a short cut to wealth creation really exists - and imagine how rich we will all become based on the "something for nothing" principle.

Based on this assumption, perhaps we will then be able to make a law that a business owner's income and revenue is guarantee by the state. If the business' products are of poor quality and it starts to incur losses as a result - no problem - we will just increase taxes and subsidize the deficit.

If unions can demand salary increases based on poor service delivery, then surely all of us in the private sector can do likewise.

Back to reality...

The reality is that "something for nothing" is a myth. Someone will always pay. In Greece, future generations will have to pay for the excesses of their parents. Free medical care, free education, salary increases for civil servants in South Africa must be paid by someone. Will we go the same way as Europe or will we go a different direction? Will we choose hard work, responsibility and honesty?

"Something for something" is the age old principle that we should adhere to. It is also referred to as demand and supply. Tax can only be paid for actual service. Poor service is not entitled to compensation.

Perhaps a new law is required - a law that will correlate an individual's tax liability, to the ability of the civil service to achieve its targets. This will make for nice slogan: "No target - No Tax"
By Stiaan Klue, Chief Executive of the SA Institute of Tax Practitioners



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