Opinion | Why Tax Freedom Day matters

What is Tax Freedom Day? It is the point in the year when the average South African has earned enough income to pay all the taxes they owe for that year. After that date, they are considered to be working for themselves, rather than for the state.

It is calculated by dividing total general government revenue, including taxes, levies, other compulsory payments and additions to debt, by South Africa’s gross domestic product (GDP) at market prices. This yields the proportion of the year that the average taxpayer works solely to fund the state. This year, the date was May 22, which means that the average South African taxpayer worked for the first 142 days of the year just to cover their share of the overall tax burden.

From that point onward, they are considered to be earning for themselves and their families. Since 1997, the Free Market Foundation (FMF) has marked Tax Freedom Day annually to highlight what it views as the growing tax burden on ordinary South Africans. In 1994, Tax Freedom Day fell on April 12.

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Over the past three decades, it has steadily moved later in the year, reflecting an increase in the tax-to-GDP ratio from around 30% to 38%. The negative effects of high taxation are well documented. Excessive taxation suppresses economic growth by taking money out of people’s pockets and redirecting it towards government spending.

In South Africa’s case, where the state has become increasingly bloated, money extracted from taxpayers has not only financed an oversized bureaucracy and inefficient wealth transfers, but also the primitive accumulation of wealth by corrupt politicians who have little regard for the South African public. Large sums of money that could otherwise have remained in private hands where they could have been saved, invested or productively deployed into the economy to create jobs and opportunities have instead been consumed by corruption and wasteful expenditure. As a result, the country has struggled to address its most fundamental problems meaningfully.

The Free Market Foundation has long advocated for structural tax reform that is aimed at restoring economic freedom and stimulating economic growth and productivity. As part of its Liberty First policy reform agenda it has proposed, among other measures, modest income tax cuts across all brackets combined with a multi-year moratorium on tax increases, broadening the tax base while lowering rates to reduce distortions and disincentives, and ensuring a drastic reduction in government spending and bureaucratic bloat to make meaningful tax relief possible.

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