Civil Society Call for Budget Justice

Social Movements and civil society organisations will present the following Call for Budget Justice to the Ministry of Finance at Night Vigil for Budget Justice today, 21 February 2012 at 18h00, outside Parliament in Cape Town.

As the Minister of Finance, Pravin Gordhan, prepares to give his 2012 Budget speech let him remember that the wealth of South Africa belongs to all. Government must collect taxes and spend money to ensure that everyone lives the life of dignity promised in our Constitution.

We dream about a South Africa of full employment, non-violence and equality for all women and men. We dream about a South Africa where everyone can afford quality health care. We dream about a South Africa where everyone has a home and no one is evicted. We dream about a South Africa with a government that takes the threat from climate change seriously and realises that millions of new jobs are needed to protect our environment. We know that this can be achieved. We know that everyone who wants a job can get a job if wealth and income are distributed differently and if priorities are set right.

The budget of the state is one of the most important tools we have to make these dreams reality. Our country's resources and productive wealth are to a large part put to work in the wrong places, or just taken out from the country by the business elite, something the government every year responds to by one more relaxation of capital controls.[1] At every workplace the distribution of newly created income is extremely skewed, and the skewed pattern of the primary income distribution has become worse.[2] There is therefore a tremendous space for taxing the rich and the big corporations. There is money for service delivery, public jobs, a National Health Insurance, more teachers in all schools and expanded measures to support our children, the elderly, and woman who bare the burden of inequality and the violent effects that unemployment has on everyday life.

Tax the rich

We welcome the successes of SARS in detecting tens of thousands of super-rich South Africans who don't pay personal income tax. Collecting this tax from their previously hidden incomes could give close to R100 billion more in tax revenue every year. [3]

The progress made by SARS must however not be another excuse for new tax reliefs to the high-income earners. The rich have already been given too many tax breaks: Since 1999, the government has compensated tax payers 'for inflation' at about double the inflation rate through the adjustment of tax brackets. On the top of this, the top tax rates have been lowered.

When conservative economists present the 'problem' of the 'narrow tax base' they not only ignore the fact that everyone pays VAT of 14 percent when they go to the shop. More importantly, they disregard the fact that the Low Wage Regime inherited from apartheid is vigorously defended and enjoyed by those same people who are complaining about the tax pressure. We have an economic order where one third of the employed work force earns less than R1 000 per month and half of it - close to 7 million employees - earn less than R3 000 per month. Those who complain about high taxes often enjoy an income that is ten or even hundred times higher. So the relatively small number of people able to pay personal income tax (PIT), are merely the result of an income distribution that is incredibly unequal. This minority is not 'suffering' from a narrow tax base: they are extremely favoured by the Low Wage Regime and by inequality in the first place!

In addition, large corporations have been making massive profits during the last decade. They are today hoarding hundreds of billions of rand in bank accounts. [4] They don't need the R20 billion tax relief gift announced by President Jacob Zuma in his 2012 State of the Nation Address.

The government must stop the yearly routine of to giving unnecessary tax relief to the rich. There are no visible political pressures on the government to pursue this policy. We fear that the government continues to be guided by the infamous GEAR policy document, which stated that tax revenue as a share of the national income (GDP) must not be more than 25 percent. We call on Finance Minister Pravin Gordhan to publically declare that this neoliberal policy rule has been abandoned and to increase corporate and income tax on the wealthy.

The tax revenue must be - and can be - large enough to meet the demands for public service, jobs and investments without putting the government into too large and dangerous debt. If there is to be tax relief, it is to be given to the poor: The Minister must reduce VAT on food.  VAT is a huge tax burden on all who spend most of their income on food. Especially in times of price increases that presently are heading towards 20 percent per year.

The price increases on food point to the need for building up our local food production, and cutting down on food import. To this end, the government ought to subsidise the small farmers who grow food in a way that are friendly to nature and our long term health, not the large scale farmers. The budget for land must be increased, so that the land-redistribution crisis in the rural areas can be addressed.

Pay for decent services, basic needs, public jobs, and confront climat change

If we are to realise the promise of our democratic Constitution, then the government must stop the almost systemic under spending. They must roll back the years of neo-liberal corporatization, privatization, and the resulting under capacity in the public sector. A democratic government must have the capacity to deliver decent services that meet basic needs to enable the Constitutional guarantee of dignity and to confront the epic threat of climate change. The government must create the many thousands of public sector jobs required to meet these demands and put a moratorium on all tenders that drain the budgets and corrupt our officials.

We will not present a comprehensive list of all the necessary government interventions and required public expenditure. We would like to draw the Government's attention to some examples:

The yearly R6 billion under spending of the Unemployment Insurance Fund - projected for years to come in the 2011 Budget Review - must come to an end. The government must obviously be reminded by the people that the UIF is not a tax. The workers have paid for insurance, not for the money to be hoarded or used for other purposes. Pay out the insurance money to those insured!

The excessive surplus of over R40 billion unduly accumulated in the UIF to date can be used to create decent jobs. The 70 000 people who applied for the 329 vacant posts at the Khayelitsha's new hospital illustrate the employment crisis. The government should expand the successful Community Works Program to a massive public works program that pays at least the minimum wages for a 40-hour working week. The public works programmes must create public assets that protect our environment - like building and retrofitting environmentally sound houses, providing safe and reliable public transport.

The government should develop this infrastructure that will directly benefit the majority of those living in South Africa. Unfortunately our government has other plans. The infrastructure investments announced in the State of The Nation Address are public investments that meet the needs of big business - most notably mineral extraction, dirty coal power, dangerous nuclear power and export facilities. This programme conserves the colonial patterns in our economy. It will hold back the manufacturing industry and continue the destruction of our environment.

This is not what we have in mind. We need instead a massive investment program for decent housing, school buildings, health centres and local clinics, meeting peoples' needs for quality health and education. To spend on health and education is to invest in the future. Instead of increasing electricity prices 25 percent every year in July - effectively another tax on the poor - the government should budget to ensure every household receives 200kWh free electricity. For sure: Workers who have a home and not a shack to live in and can afford to put food on the table for the whole family will be productive.
We need libraries and schools equipped with books and staff.  Age restrictions on learnerships must be taken away so that people can catch up on what they missed in schools or when loosing a job. Completely unrealistic registration fees demanded everywhere by public schools, whether legal or illegal, make a mockery of the promise Free education for all children. Such fees keep thousands of children away from school. Indeed, free school uniforms in the public schools, would both put learners on more equal footing, lift a heavy burden from the budget of poor households and give work to our textile industry.

For accountable, effective, democratic and participatory government

Last but not least, we demand a shift from vague promises to action plans with deadlines for each year. Now is the time to deliver. Listen to the people! Don't tell us about "five million jobs in 2020", tell us how many new decent public sector jobs will be created before next year’s Budget Speech.  Government must abandon their elite organisational culture. The people must be involved in our own development. We are citizens of a democracy and not passive 'consumers' who wait for corporate services. But it is the corporate culture of Government that has seen ridiculous remuneration of public servants and allowed the plundering of government resources by greedy officials. We need clear mechanisms to deal with corruption.

There must be serious consequences for those who steel public money from the people.

In this regard we recognize that currently South Africa is one of the world leaders in budget transparency with respect to the public availability, timeliness, and comprehensiveness of its national and provincial budget reports[5]. However, the same cannot be said for the availability of more disaggregated budget information. In particular communities struggle to obtain specific budget information about their local clinic or school. We demand greater transparency across our budgeting process. People have the right to know and we are deeply concerned that the Secrecy Bill - currently before the National Council of Provinces - may limit our access information vital to shaping the spending priorities of Government.

South Africa does not have a poverty problem! We have a wealth problem! We call on Parliament to reassure us that we do not also have a Democracy problem! Parliament must pass a just budget!

Ends

The Call has been endorsed by:

  • Abahlali baseMjondolo;
  • Alternative Information Development Centre;
  • Anti Eviction Campaign;
  • Democratic Left Front;
  • Ecopeace;
  • Environmental Monitoring Group;
  • Get UP Stand Up;
  • Institute for Zero Waste in Africa;
  • Mandela Park Backyarders;
  • New Womens Movement;
  • Peoples Heath Movement;
  • Progressive Youth Movement;
  • Right2Know Campaign;
  • South Durban Community Environmental Alliance;
  • Timberwatch, and others.

For more information contact:

Dick Forslund
Alternative Information Development Centre
Tel: 079 912 3372

Vainola Makan
New Womans Movement
Tel: 072 573 1197

[1] A study at Wits made by Ashman, Fine and Newman (2011), estimates that illicit capital flows out from the country amounts to hundreds of billions of rand, each year since the ANC government began liberalising financial controls. The illicit flows since 1999 can be estimated to between 5-20% of GDP depending on year. The latest year examined in the study is 2009. Illicit flows that year are estimated by the researchers to 10% of GDP. That equals R230 billion.

[2] Reference to the increase in profits as share of GDP: See The South African Reserve Bank (SARB), Quarterly Bulletin to which the National Accounts are attached: The falling wage share of the national income  (and the corresponding increasing profit share) is reported in "Key Information" tables, the table "Ratios of selected data at current prices"; Column : "Compensation to employees...".

[3] See for example: The MoneyWeb: "Sars uncovers 1000s of missing rich tax cheats" URL: http://moneywebtax.co.za/moneywebtax/view/moneywebtax/en/page259?oid=64640&sn=Detail&pid=1 (2012-02-15).[4] In August 2011, the investment company Stanlib reported that big business in South Africa sits on a R479 billion mountain of cash. This corresponds to nearly half of the budget that Pravin Gordhan will present. According to Stanlib, a wait-and-see practice of simply depositing excess profits in the bank, has reached the same levels as in 1995.

[5] The International Budget Partnership's Open Budget Survey ranked South Africa first out of 94 countries in 2010.

To view other NGO press releases, refer to www.ngopulse.org/group/home-page/pressreleases.

Date published: 
Monday, 20 February, 2012
Organisation: 
Abahlali baseMjondolo, Alternative Information Development Centre, Anti Eviction Campaign, Democratic Left Front, Ecopeace, Environmental Monitoring Group, Get UP Stand Up, Institute for Zero Waste in Africa, Mandela Park Backyarders, New Womens Movement,

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