Dear Friend of the IRR,

In the last few newsletters, we've made it clear that South Africans pay too much tax and the government is wasting it.

What can be done about it?

The newest report in our ‘Blueprint for Growth’ series, titled ‘Slash Waste, Cut Taxes’, offers simple steps to cut down on government waste, put more money back in the pockets of South Africans, and boost economic growth.

Slash Waste, Cut Taxes

Imagine a rural town 10km away from a main road. The government wants to tar the gravel road so that the residents can have better access to markets, tourism, and jobs. There is enough money to tar the entire 10km, but because of BEE premiums and complicated procurement rules that enable corruption, the money runs out at 7km. The town still doesn't have access to the main road, so the residents cannot benefit from the opportunities it could bring them.

That's what is happening in South Africa. The government is large and has a lot of money, but because of policies like BEE and preferential procurement, we as taxpayers do not benefit as much as we should.

Our report ‘Slash Waste, Cut Taxes’, written by IRR Fellow Gabriel Crouse, recommends that the government:

1. Implement the Zondo Commission recommendation to put value for money at the core of all public procurement, and
2. Reduce VAT to 11.5%.

BEE premiums complicate public procurement, which allows an estimated R150 billion per annum to be lost to BEE and corruption. By prioritising value for money over everything else, there could be an ‘extra’ R150 billion which can go back into the pockets of South Africans.

The report explains that the best way to do this is to reduce VAT to 11.5%. Because all South Africans pay VAT, this will benefit everyone, and make the biggest difference to the poor.

This, in turn, will boost economic growth and make life better for all South Africans.

The full report, which you can download for free on our website, details how these recommendations are not only possible, but crucial for South Africa's future.

You can also read a summary of the report and watch the release briefing featuring the author Gabriel Crouse, IRR CEO Dr John Endres, and IRR Head of Strategic Communications Hermann Pretorius.

Thank you for your support, which allows us to do the rigorous research necessary to develop and promote simple solutions to South Africa's problems.

Correction: In last week's newsletter, we stated that the civil service wage bill increased from R93 billion to R62 billion over the last two decades. In fact, the wage bill increased from R93 billion to R623 billion. We apologise for the error.

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