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SARS projects ~R300bn less tax revenue this year. Together w/ SA& #39;s debt troubles, Covid-19 relief package and ongoing hunger crisis, we face major financing concerns. @AdamBakr and I explore 3 options for public discussion (incl @CovidCoalition). (1/6) https://mg.co.za/opinion/2020-05-09-three-ways-to-finance-the-covid-19-policy-response/">https://mg.co.za/opinion/2...
1. We support a solidarity tax on high incomes. Crucial point: Using past expenditure patterns, we roughly project substantial savings by *employed* high earners from reduced consumption (no booze or restaurants!). This should be taxed. (2/6)
2. We support an expansion on price controls to basics like eggs & bread. We estimate most poor households& #39; food expenditure is at retail stores (~half at chains!). Prices directly impact hunger relief: cash grants are only half the job. (3/6)
https://pmbejd.org.za/wp-content/uploads/2020/04/Food-and-Coronavirus_Research-Paper-28042020.pdf">https://pmbejd.org.za/wp-conten...
https://pmbejd.org.za/wp-content/uploads/2020/04/Food-and-Coronavirus_Research-Paper-28042020.pdf">https://pmbejd.org.za/wp-conten...
Note: Taxes and price controls both help redistribute food supply to poor households. NB as shortages in essentials may kick in.
There are other options, such as a wealth tax -- excellent data given by @aroopc82, @amorygethin and @Leo_Czajka. (4/6) https://theconversation.com/coronavirus-why-south-africa-needs-a-wealth-tax-now-137283">https://theconversation.com/coronavir...
There are other options, such as a wealth tax -- excellent data given by @aroopc82, @amorygethin and @Leo_Czajka. (4/6) https://theconversation.com/coronavirus-why-south-africa-needs-a-wealth-tax-now-137283">https://theconversation.com/coronavir...
3. Tax financing may still be pro-cyclical (we don& #39;t want to prolong the recession!). Debt finance options should balance concerns of interest payments & currency risk, incl. issuing bonds, lending from international institutions, and setting govt borrowing cost to 0. (5/6)
Caveat: We have no policy/public finance expertise so this is speculative!
But SA needs to be innovative in financing. The tax shortfall, debt & social cost are just too high for business as usual. Fortunately there are several opportunities to be robustly discussed. (6/6)
But SA needs to be innovative in financing. The tax shortfall, debt & social cost are just too high for business as usual. Fortunately there are several opportunities to be robustly discussed. (6/6)
Addendum: Our discussion also engages, Who pays for the lockdown? Despite existing extreme inequality, this lockdown is *regressive* -- e.g. lower paid workers are more likely to lose jobs. Inequality will likely *increase* if we don& #39;t have *more progressive* financing.
