WeeklySA_AdminTaxes: No proposal to increase taxes
By Isaac Moledi
The Department of Social Development has welcomed recent views and comments expressed in the media responding to the Green Paper it published last week.
It is however concerned that some of its proposals have been misrepresented, resulting in considerable concern that government would introduce a new tax of 12%.
Responding to recent media reports that slammed the department’s Green Paper that aims to overhaul the country’s social security and retirement industry as well as the grant systems to include the much wider groups of people, the department said it was aware of the public sentiments but called on the media to report more responsibly on its proposals, and not only give a platform for those who wish to stifle engagement by taking elements of the proposals out of context.
Last week, the department of social development published a Green Paper for public comment and interested parties and organizations were invited to submit any substantive comments or representation by no later than 10 December 2021. The Green Paper, proposed by the department’s Minister Lindiwe Zulu, requires all employers and employees to contribute to a government-run national security fund.
According to the Green Paper, the proposed compulsory fund will be based on what is described as “social security principles of risk pooling and social solidarity” whereby individual contributions are expected to be between 8% and 12% of earnings. According to the Green Paper, high unemployment levels have left those between the ages of 18 and 59 who do not qualify for grants, with no means to an income.
“There are no provisions to address the plight of individuals who have no income but do not meet the test criteria to receive social grants (the 18 – 59 age group challenge).
The expectation that this group would derive their income primarily from selling their labour has proven to be ineffective in the context of persistent, long-term and structural unemployment,” according to the Green Paper.
“This gap also falls short of the constitutional mandate and the social protection floor envisaged in the National Development Plan, and this led to the proposal to investigate the feasibility of a basic income grant.”
The paper also raises concern that millions of workers are currently not adequately covered for retirement, disability and survivor benefits, and suggests that a National Social Security Fund (NSSF) could fill this gap.
“Although private occupational and voluntary schemes partially fill this gap, some 6.2 million formal sector workers – primarily low-income earners, informal workers and informal sector workers – areexcluded from such arrangements.”
According to the paper, those earning less than R22 320 per year will not be obliged to contribute to the fund. In terms of the expansion of social security grants, the paper proposes that all dependent children, the disabled and the elderly and those of working age, be eligible for income support, regardless of their income or assets.
“This basic income will form part of a comprehensive social protection floor and is the basis of the Pillar 1 reforms. The additional expense to the fiscus could be phased in over time through changes to the structure and value of tax rebates, subsidies and the possible introduction of additional tax. The proposal for the universalisation of the existing grants is premised on the fact that State benefits are mostly universal already, but fragmented, with different systems.”
In a statement released this week, the department said the Green Paper makes comprehensive reform proposals which are intended to create a more inclusive, coherent and affordable system.
“We wish to assure the public that there is no proposal to increase taxes, but rather a restructuring of the current system of contributions to achieve greater benefits for members.
We wish to encourage the media to report more responsibly on the proposals, and not only give a platform for those who wish to stifle engagement by taking elements of theproposals out of context.”
The department described the Green Paper as a “public consultation document” that enables members of the public and all interested stakeholders to be involved in the policy development process.
“Various specific issues are highlighted with possible courses of action. At this stage, the green paper articulates a point of departure for substantive public engagement.”
Without going into the merits of the views expressed in the media, the department said that the media comments were however welcomed “as this will help Government to refine and reconsider some of the proposals. We accept that this is a complex issue where some interests will be more vocal than others.
“We are therefore hoping to use the process of engagement to establish just such a vision for the long-term future of our system of social security. It is not our intention to introduce such a system in a way that harms economic prosperity or undermines the financial services system.
“Our view is that it is very important that all South Africans begin to think what they want from their social security system. Are they happy with the current system? If not, how should it change?”
