In South Africa’s post-coronavirus budget, more than half of tax revenue goes to public servant salaries

Comments 1

Claim

Out of every R1 paid in taxes, 58 cents goes towards paying the salaries of public servants

Source: Leon Schreiber, Democratic Alliance shadow minister for public service and administration (June 2020)

mostly-correct

Verdict

Explainer: 51.4% of total tax revenue goes to public servant salaries, or 51.4 cents out of every R1 in tax.

  • Out of every R1 paid in taxes, 58 cents now goes towards paying the salaries of public servants, Democratic Alliance shadow minister Leon Schreiber claimed recently.
  • This is according to South Africa’s June 2020 supplementary budget, revised from the February budget to take into account the new realities of the Covid-19 pandemic.
  • Africa Check found that public servant salaries will take 51.4 cents out of every R1 in total taxes. The wage bill plus debt repayments together take up 72.4% of tax revenue.


South African finance minister Tito Mboweni delivered his supplementary budget review speech on 24 June 2020. 

Rich with comparisons between South Africa and the Aloe ferox, a single-stemmed plant indigenous to Southern Africa, Mboweni announced changes to the February 2020 budget, made necessary by the Covid-19 pandemic

In the new budget, 58 cents out of every R1 paid in tax is used to pay the salaries of public servants, Leon Schreiber, the Democratic Alliance’s shadow minister for public service and administration, claimed in a statement.  

Schreiber said this wage bill plus debt repayments, which take 22 cents of every rand, made 80% of all tax revenue unavailable for spending on everything from social grants to education, healthcare and infrastructure development. 

Do the figures support Schreiber’s claim about public pay? We pulled out the balance sheets. 

How much tax is collected?

When Africa Check asked Schreiber for the source of his claim, he referred us to a table in the supplementary budget review that showed the main budget revenue for the 2020/21 financial year would drop from February’s projected R1.398 trillion to R1.099 trillion. 

“At the same time, expenditure on compensation of employees will remain at the R638 billion projected in February 2020,” he said. This is 58% of the R1.099 trillion main budget revenue, or 58 cents out of every R1 in tax. 

But revenue in the main budget comes from a number of sources, including non-tax revenue, the national treasury told Africa Check. To calculate how much tax money goes towards paying public servants, it is better to look at gross tax revenue – the total amount of tax collected by the government. 

Gross tax revenue was pared back to R1.121 trillion, the treasury said, although this was not published in the supplementary budget review. In February, the government expected to collect R1.425 trillion in tax. It is now anticipating R304 billion less than that.  

How much of the gross tax revenue goes towards paying public servants? 

Out of every R1 in tax, 51.4 cents for public servants

The government planned to spend R638 billion on public servant salaries, Schreiber told Africa Check, as shown in a table of expenditure by economic classification in the February budget

But this table includes all entities of government, some of which collect taxes, treasury said. For example, the South African National Roads Agency collects tax in the form of toll fees. But exactly how much tax this entity and others will collect will only become clearer in October when the medium term budget policy statement is published. 

In the meantime, in order to compare apples with apples, a more appropriate measure would be the “consolidated national, provincial and social security funds” found in the statistical annexure of the February budget, the treasury said. This provides a more detailed breakdown.

The breakdown estimates the government will spend R576 billion on paying public servants in the 2020/21 financial year. This is 51.4% of gross tax revenue (R1.121 trillion), or 51.4 cents of every R1 paid in taxes.  

Without the projected R304.1 billion loss in tax revenue, this figure would have been 40%, or 40 cents out of every R1 paid in taxes. 

The public servant wage bill dropped by just R519 million in the June 2020 supplementary budget. The saving was mainly due to vacancies not being filled and funds being suspended for Covid-19 purposes. “Further adjustments may be considered in October,” the treasury said.

‘Debt is our weakness’

While the budget for public servants salaries remained largely the same, debt repayments were projected to increase to R236.4 billion in 2020/21. This is 21% of gross tax revenue (R1.121 trillion) or 21 cents of every R1 in taxes. 

Since February, the amount South Africa has to borrow for the 2020/21 financial year has grown from R433 billion to R777 billion. The money will come from short and long-term loans from local lenders, and from foreign-currency loans. 

The increase is almost entirely due to the projected shortfall in tax revenue, Daniel McLaren, budget analyst for the Budget Justice Coalition, told Africa Check. “A similar increase is being experienced in every country in the world, as they too battle the economic fallout from Covid-19,” he said. 

The higher debt repayments were increasingly crowding out the government’s spending plans, the treasury told Africa Check.  

Conclusion: In revised budget, 51.4 cents out of every R1 in tax revenue goes to public servant salaries.  

Leon Schreiber, Democratic Alliance shadow minister for public service and administration, recently claimed that out of every R1 paid in tax, 58 cents goes towards paying South Africa’s public servants. 

The national treasury told Africa Check that it aims to collect R1.121 trillion in tax during the 2020/21 financial year and R576 billion of that will go towards paying public servants. 

This is 51.4 cents out of every R1 paid in tax. The extra 7 cents represents R80 billion in tax revenue that has been allocated elsewhere, the treasury said.

Public servant salaries and increased debt repayments, which cost 21 cents in every rand, together take up 72.4% of South Africa’s gross tax revenue – leaving 27.6% for everything else.  

We rate this claim as mostly correct. 

© Copyright Africa Check 2020. Read our republishing guidelines. You may reproduce this piece or content from it for the purpose of reporting and/or discussing news and current events. This is subject to: Crediting Africa Check in the byline, keeping all hyperlinks to the sources used and adding this sentence at the end of your publication: “This report was written by Africa Check, a non-partisan fact-checking organisation. View the original piece on their website", with a link back to this page.

Comment on this report

Comments 1
  1. By Jacob

    We hear a lot about the tax burden of government employees for instance the sensational quote that out of every R1 tax revenue a staggering 58c is spent on wages. A simple subtraction of the total tax revenue less the money wasted on public employees.

    It is however a vastly more complicated answer than just that. An intelligent answer should obviously also entail what percentage of the total tax revenue is contributed by the public sector. They do pay tax and that tax is included in the total tax revenue. So, the answer is immediately skewed.

    It is however easy to answer and will no doubt decrease the 58c with a lot. My guess is around 30%. We all know that business use every possible loophole to pay as little tax as possible. As the billionaire, Warren Buffet famously said, his secretary pays more personal tax than him.

    What is more difficult to determine is what percentage of their salaries is paid in other taxes for example VAT. It will also contribute to the total tax revenue and will lower the actual cost even more. Let us say by another 15%. So, the 58c is now closer to 30c.

    But it does not stop there. The public servants also spent their money from the largest of enterprises down to the level of sole proprietors and even domestic workers. These people either survive, because of the public sector or thrive and pay even more taxes.

    Indirectly the money, always flows back to the coffers of Government. In the end the public service comes at a bargain price as the work they do keeps the wheels rolling and keep industry alive. At the current rate, the public service is losing their brightest brains, because the lure of the private sector is just too great.

    We can already see the brain drain at National Treasury and how it impacted on our economy. Government consists of many people and some are paid too little, but there are vast numbers of them needed. For example, the security and health services.

    Then we also need bright and innovative managers. Many of them have already left the public service in droves, because their salaries stagnated a decade ago. With practically no benefits and a guaranteed below inflation salary increase year after year it is easy to see why.

    vote
    Reply Report comment

Leave a Reply

Your email address will not be published. Required fields are marked *

*

Africa Check encourages frank, open, inclusive discussion of the topics raised on the website. To ensure the discussion meets these aims we have established some simple House Rules for contributions. Any contributions that violate the rules may be removed by the moderator.

Contributions must:

  • Relate to the topic of the report or post
  • Be written mainly in English

Contributions may not:

  • Contain defamatory, obscene, abusive, threatening or harassing language or material;
  • Encourage or constitute conduct which is unlawful;
  • Contain material in respect of which another party holds the rights, where such rights have not be cleared by you;
  • Contain personal information about you or others that might put anyone at risk;
  • Contain unsuitable URLs;
  • Constitute junk mail or unauthorised advertising;
  • Be submitted repeatedly as comments on the same report or post;

By making any contribution you agree that, in addition to these House Rules, you shall be bound by Africa Check's Terms and Conditions of use which can be accessed on the website.

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.