Congratulations SA taxpayers. You've paid government. Now what you earn is yours!
The Free Market Foundation pegs 21 May as Tax Freedom Day 2021
Johannesburg – Before you earn a cent, government takes a chunk out of your pay packet in taxes. 21 May marks Tax Freedom Day 2021, according to research by the Free Market Foundation. Tax Freedom Day (TFD) is a measure of how much time you spend working for someone else’s benefit – government GDP – rather than your own.
“Tax Freedom Day is the day we, the people of South Africa, at last start to work for ourselves. It is the day on which we have finally paid our tax bill in full,” explains Garth Zietsman, FMF statistician. From 1 January until 21 May, all the income earned by average South Africans is needed to pay for one year of government spending.
TFD 2021 falls two days later than in 2020 and almost six weeks later than in 1994. This means that the average South African taxpayer has had to work 140 days (38.4%) in 2021 instead of the 138 days (37.8%) they worked in 2020 to pay their taxes. In 1994, South Africans took 101 days to pay for government, a whole 39 days fewer than this year.
Unfortunately, having a later TFD (meaning less money for yourself) is likely to continue as government spending, the deficit, and government debt increases.
Each year, Zietsman calculates South Africa's TFD. According to Zietsman, “Tax Freedom Day is calculated by dividing General Government Revenue by GDP at market prices, then multiplying the result by the number of days in a year, and finally adding a day.”
TFD is determined in this way and spread over the first months of the calendar year to give us an idea of how the burden of taxes affects the average taxpayer. It is accepted that some lose more and others less of their hard-earned income in taxes, but the average, measured in days of the year, confirms what people know intuitively: the taxes we pay are too high.
Zietsman elaborates: “South Africa has the 12th highest income tax burden, the 9th highest company income tax burden, and the 14th highest non-resource tax burden worldwide. For our level of economic development, that is exceptionally high by international standards.”
Government produces little to show for the high tax burden. Zietsman points out that, “Our educational system is dismal, and the crime rate is high with most serious crimes going unsolved.” While taxes have been trending upwards, economic growth has been trending downwards. The result is that South Africans have had to carry a growing tax burden while getting poorer.
Growth requires lower taxes, argues Zietsman. Reduced taxes would provide a greater incentive for private individuals to work, save and invest. The net result would be greater investment, more innovation, a stronger economy, less unemployment, less poverty, and a more contented populace.
Government is both less innovative and less efficient than the private sector. High taxation slows, not grows, an economy.
On TFD, we have the opportunity to think about the role of government in our lives and whether we are getting value for money.
The table below shows that TFD 2021 is two days later than in 2020 and almost six weeks later than in 1994.
Year – Tax Freedom Day
1994 – 12 April
1995 – 16 April
1996 – 13 April
1997 – 16 April
1998 – 16 April
1999 – 20 April
2000 – 22 April
2001 – 20 April
2002 – 26 April
2003 – 26 April
2004 – 2 May
2005 – 11 May
2006 – 12 May
2007 – 14 May
2008 – 10 May
2009 – 26 April
2010 – 4 May
2011 – 26 May
2012 – 16 May
2013 – 20 May
2014 – 19 May
2015 – 20 May
2016 – 25 May
2017 – 25 May
2018 – 13-May
2019 – 18 May
2020 – 19 May
2021 – 21 May (2 days more than 2020; over 5 weeks more than 1994)