New govt proposal: Pay every South African an income grant, then tax it back from the rich
- A universal basic income grant, paid to every adult South African regardless of their income, is the way to go, a new green paper argues.
- Not using means-testing will promote social solidarity, and will be administratively much easier, says the department of social development.
- SARS can just take the money – and a little bit extra – away from richer people again by changing tax brackets, it says.
- And selling a 10 percentage point increase on taxes to workers will be easier if they get some of the cash.
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South Africa needs a universal basic income grant (BIG) system in which every adult gets cash, regardless of how rich they are, the department of social development argues in a new policy document.
Then the SA Revenue Service (SARS) can just take the money back from wealthier South Africans again, plus a little on top.
"One of the key decisions that need to be made is whether South Africa should implement a universal or a means tested grant," says the Green Paper on Comprehensive social security and Retirement Reform, gazetted this week.
But it leaves no doubt as to which choice the social development department would prefer – for both logistical and political reasons.
A universal grant can be rolled out "in a matter of months", it says. Giving everyone cash also "promotes social solidarity and buy-in to the system", and "reduces stigma of the poor and discontent amongst the wealthy who feel that they are the ones funding the system."
The wealthy would, of course, still be funding the income transfers, and that would be the responsibility of SARS rather than the SA Social Security Agency (SASSA).
"Administratively, it is a lot easier for SARS to recoup the grant paid to a wealthy individual with a technical adjustment to the tax brackets than for SASSA to interview millions of applicants to determine whether the applicant qualifies based on income," reads the green paper.
"SA’s tax authority is also significantly more advanced than the Social Security Agency, hence relying on the Tax Agency ability to test income is likely to be a lot more effective than through Social Security Agency."
By one estimate it would require a 10 percentage point increase in income taxes to fund a basic grant, and that is another reason to give people who have jobs free money too, the green paper argues bluntly.
"It will also be much easier to implement a reform that will require a significant adjustment to taxes as it will be easier for government to sell an increase in taxes on the working age population with an increased transfer to that same population."
The grant would be paid to people between the ages of 18 and 59, and may over time replace existing grants for child support and older people, "with top ups for various contingencies".
(Compiled by Phillip de Wet)
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