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Tax ROI

By: Mpiyakhe Dhlamini 2014-07-31 15:28

 For a government to exist, it must necessarily itself  sustain itself through the productive endeavour of  the nation’s citizens, government cannot produce anything and relies solely on taxes for it’s survival. A question then arises: Why should the productive citizens agree to fund a government? The short answer to that is: Return On Investment or, more commonly, the acronym ROI.

You see, ROI represents theadded value that one gets from an investment and can either be positive (the investment grows) ,negative (part or all of the initial investment is lost), or neutral (the investment is stagnant, neither growing nor declining). For any investor, nothing is more important than ROI and no investment should ever be made if the expected ROI is not positive.

They is no divine law that gives the government a right to a part of what I produce, in fact it only makes sense for me to pay tax if I consider it to be an investment that I make with the expectation of a positive ROI; for some the roi will be in the form of increased sales because of a road that has been built linking their business to the CBD, savings on insurance premiums because there is less chance of property theft because of an efficient police service, property that would have been destroyed by a foreign invasion force is safe because of an efficient defence force e.t.c The dividend due to taxpaying citizens comes in many forms and will generally differ from person to person, but for all taxpayers the cumulative benefit afforded by having a government should be greater than the value of the taxes they pay, otherwise what is the point of paying it?

In other words, the government is nothing more than a public corporation which must deliver value for it’s shareholders just like any company listed on the jse, to believe otherwise is as stupid as the old European idea that the monarchy was divinely appointed, just as much as God didn’t choose Elizabeth II to be queen He also didn’t tell Nhlanhla Nene to take 45% of your hard earned money therefore Mr. Nene must account for every single cent and not only that, he must deliver to me more than he took from me originally.

Let us consider if that is indeed the case, by looking at a few areas of government spending. Government spends billions of education every year, they justify this expenditure by saying that as south africans become more educated they will gain the skills to become more productive and thus we will all benefit from this because the economy will grow faster, this is true, but every objective assessment of educational outcomes has shown that south africans perform so badly that in terms of education I would get a better ROI if I were a citizen of zimbabwe.

So our education ROI is negative, what about defence and security? The taxpayer spends about 40billion on the sandf every year, yet we have porous borders and our marine resources are abused by foreign nationals. On security: A disproportionate number of south africans feel the need to spend extra money hiring private security companies which should not be the case if the government is providing adequate security to everyone.

Some things that the government spends money on are not even meant to give a positive ROI, consider the billions spent on grants, like most people I believe that sometimes people need to be helped to get on their feet and indeed many people have helped me when I needed a helping hand; but this is not the role of government, the only thing government must do is maximise ROI for taxpayers. Citizens can and do help each other, with much more effect because the people who they help are known to them and thus personal charity by individuals is much more effective rather than the government one-size-fits-all solutions. Individuals could probably do more for charity if they had control of the part of their taxes that is currently spent on grants.

If any listed company fails to deliver a positive ROI, then the board would most likely fire the management team, if the board failed to properly hold management to account then the shareholders would fire the board. In the case of south africa, parliament is the board and we are the shareholders. Considering we just had our equivalent of an AGM on the 7th of May, we can only hope that a dividend will be declared soon, we have waited long enough.

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