“Please Remit Beer, Brooms, or Stones…”

Back in AD 69, Emperor Vespasian generated significant revenue by taxing the trade in urine gathered at public restrooms. No kidding! Ancient Romans valued urine for its ammonia content, but some considered this odious. SHARMINI NAIDOO says South Africans will feel the same way about certain moves by the South African government.

The earliest recorded date of taxation took place in Ancient Egypt around 3000 to 2800 BC – even predating money. As Brian Handwerk wrote in National Geographic in 2016, taxes have traditionally been applied to “almost everything” and paid with “almost anything” – from beers, beds, and stones to even broomsticks!

The World Bank points out that collecting taxes and fees is a fundamental way for countries to generate public revenues that make it possible to finance investments in human capital, infrastructure, and the provision of services for citizens and businesses.

It seems the South African government hasn’t done the best job in this regard. “Government spending has exceeded revenue since the 2008 global financial crisis. These rising annual budget deficits have reached an extent where the government will borrow an average of R553 billion per year over the medium term. As a result, gross debt rises from R4.8 trillion in 2023/24 to R5.2 trillion in the next financial year,” pointed out Minister of Finance, Enoch Godongwana, in his mid-term budget report on 1 November 2023.

In short, the financial status of South Africa Inc is in dire straits. The Minister went on to say that the economic outlook will continue to remain weak: a result of the “cumulative effect of power cuts, the poor performance of the logistics sector, high inflation, rising borrowing costs, and a weaker global environment”.

If nothing significant is done by government to curb the excessive spending and eradicate the blatant corruption and pilferage in the state-owned entities, these astounding and almost incomprehensible amounts of money will never be enough. Nor will they even come close to meeting the country’s ever-burgeoning social needs, resulting in even lower confidence in the State.

When taxpayers feel overburdened and corruption hinders the appropriate use of funds collected, it erodes not only tax morale but also confidence in the tax authorities. This, in turn, makes revenue collection even more onerous. With a tax hike imminent next year, many analysts feel that South Africans can ill afford any additional increase in taxes which will force consumers to stretch an already dwindling rand even further.

Other government interventions such as the recent announcement by the National Department of Health (DoH) to end medical aid tax credits – funds which are used to reimburse medical aid scheme members annually – will create a further drain on taxpayers receiving these benefits. The intention is for monies to go instead to the National Health Insurance (NHI) Fund. The constitutionality of the NHI Bill is currently being questioned amidst growing concerns over government’s lack of capacity to manage the fund and the threat of corruption and maladministration.

On 8 September 2023, the Department of Transport (DoT) published the highly controversial draft Road Accident Fund (RAF) Amendment Bill. The primary objective of the Bill is to reduce the liability of the RAF by introducing measures that curtail accident victims’ rights to claim and to reduce the amount of compensation available. The RAF has historically suffered from cash flow constraints, administrative problems, and huge backlogs in unpaid claims due to ongoing mismanagement and financial challenges.

The Bill proposes that the Fund move away from a compensation model to a social benefits model, with the benefit not being quantified. If adopted, the rights of all drivers, passengers, and pedestrians to claim compensation for injuries suffered in motor vehicle accidents will be taken away.

Proposed amendments include:

• The loss of income and support that can be paid in a lump sum will be less than the current limit of R319,810 per annum, irrespective of the actual income forfeited.
• Future loss of income/support will be paid in instalments rather than in a lump sum, subject to the periodic review of the Fund’s liabilities.
• Medical expenses will be paid according to a tariff, which is likely to be far less than private medical care tariffs.
• Accident victims will have to personally fund medical treatment which exceeds the RAF tariff, irrespective of whether the more expensive procedure is necessary.

The Bill excludes benefits where:

• Crashes did not occur on a public road which is currently covered in the RAF.
• Claimants fail to submit an affidavit stating how their claim arose together with the prescribed documents.
• A bus passenger and their dependents are compensated by the carrier’s insurance. This is an extremely onerous exclusion for bus operators because currently the cost of passenger liability insurance is rated on the fact that it is “contingent” rather than first-line compensation cover. The resultant effect will be that insurers will be able to be called upon to provide full indemnity for injured passengers and their dependants, which will exponentially increase the cost of this cover.
• The medical costs paid by a claimant’s medical aid will be excluded from RAF claims, which will result in increased medical aid premiums for its members and all other members of medical insurance.
• The blood alcohol content of a claimant (being the driver or a cyclist) exceeded the legal limit, or the claimant was under the influence of a drug. A driver over the legal blood alcohol content limit will now be liable to the RAF for benefits paid resulting from their negligent driving.

Bus operators that have additional emergency medical evacuation policies for accidents with passenger injuries will also be severely impacted if the RAF does not allow operators to recover these costs. As a result, the industry may see drastic premium increases.