More taxes or more borrowing will not be helpful to finance buying Covid-19 vaccines. Consumers are already in dire financial straits, as is the country. All that is left is to cut government expenditure, such as selling off South African Airways (SAA) and using the money to pay for vaccines. Or allow the private sector in.
This is according to Professor Jannie Rossouw from Wits Business School.
Rossouw says government must prioritise its expenditure, such as selling SAA, or tax individuals or companies by using a tax surcharge such as the solidarity tax surcharge in 1994.
“The problem is that government can get addicted to levying the surcharge and do it again next year and the year after. We can then find that after paying for the vaccines, next year we might pay for SAA and the year after for something else.”
Rossouw says government has lost its ability to borrow more money and therefore this is not an option. However, selling SAA will get a lot of support from the citizens of the country.
“You can also ask why the private sector cannot also buy vaccines,” he says.
National Treasury director-general, Dondo Mogajane, recently indicated that government could fund the vaccines by raising taxes, borrowing more from the market or reprioritising government’s departmental budgets.
Johan Troskie, an independent tax lawyer, says while he recognises that every state has the need to find ways to finance a Covid-19 vaccination programme of this scale, he thinks it is neither reasonable nor feasible for the state to finance vaccination through raising taxes.
“This government has an alarming record of expenditure prioritisation, to say the least. Its management of the pandemic through ill-considered lockdowns and banning of products has cost the economy upwards of R100 billion.
“Its continued insistence on recapitalising a state-run airline is highly questionable, if not downright irresponsible. Besides, this government generally and the lockdowns specifically has had a massive negative impact on taxpayers, who are at the limit of what they can afford.”
Troskie says raising taxes in this situation would once again be irresponsible and will have a huge detrimental effect on taxpayers and the economy.
“Scrap the capitalisation plans for an airline and divert the money to the vaccination efforts.”