Background                                                               PDF: Policy Statement Taxes and Teal

Objectives and Strategies:

Objectives:

The Direct Democracy Forum’s (DDF) main objectives for TEAL as a tax system are:

  • to reduce the tax rate from between 30% and 60% of your income (depending on your income levels) to 1/2% of your economic activity, which to the average wage and salary earner translates to 1% of your income.
    • It is important to note that a 1/2% levy on all bank transactions can equate to 30% of the GDP, which is a generally acceptable level for conventional taxes, but that this depends on many factors in an economy.  Generally, the higher the volume of money in the economy, the higher the total levy will be.  So Teal works well in a dynamic economy and not so well in a stagnant economy.  But this is generally true for most tax systems.  
  • that what South Africans pay in taxes becomes a matter of verifiable fact and not  a matter of urban legend or half baked and outdated computations.  
  • that every South African contributes his or her fair share toward the costs of running our society, something we suspect is not happening.
  • that all the needs of the country be met by this single tax system.
  • that real tax rates must plummet (no more taxes accumulating to 60% of income). 
  • that when all the above conditions are met, the country must operate a balanced budget (which SA presently does not do), that is, have 
    • no national or sovereign debt and not run a bank overdraft to the tune of R1.4 trillion.
      •  Work it out, the national debt (said to be 35.6% of the GDP or 35.6% of  R3.973 trillion) = R1.414 trillion for 2011 (see above for GDP and CIA world fact book for the National Debt estimate).   
    • to not have to pay the billions of rands of debt service fees (2010 at R71.4 billion) that we are presently paying.  

Strategy:

  • We believe these objectives will be achieved by the introduction of TEAL as the sole source of state income.  
  • TEAL will be introduced progressively, say starting with VAT.  When the inflow of TEAL equals the inflow of vat, vat will be reduced to zero and eventually be scrapped.
    • The next tax will be selected, added to the vat target and TEAL will be increased to equal the combined inflow of both taxes, the second tax will be reduced to zero and eventually will be scrapped. 
      • and so on, until all existing forms of tax have been replaced by TEAL.

Benefits:

  • The State will know precisely how much tax it collects, and from whom it collects the taxes.
  • The general public and every individual in the land will also know exactly how much he or she pays in taxes (no hidden taxes).  
  • The process will be simple and less costly than the present system (the levy is collected through the banking system, much like vat is already collected by the banks from their customers) 
  • The process will not involve any further interaction with the state (no tax returns, tax accounting or tax audits).
  • Sufficient revenue will be collected to satisfy all the logistical and social needs of the country (see Expected National Income From TEAL to 2018 ).
  • Sufficient revenue will be collected to reduce the National Debt to ZERO within 4 to 5 years (see Teal Chart: Effect of TEAL on the National Debt).

Conclusion:

The DDF believe that Income Tax and the plethora of other taxes have failed the modern state, world-wide.  The US Government Debt is $15.7 trillion and rising (as you read this that number is already way out of date). The UK’s National Debt was estimated to be 1.1 trillion Pounds Sterling by 2011. How is the income tax system working in these two countries?  How is it working in South Africa?  The answer to both questions is, it is not.  Not here, not anywhere.  In line with the DDF’s overall goal to simplify our lives in an ever more complex world, we want to rationalise taxes as discussed above and engage in a program of rationalisation of state commitments so the state empowers those in need while freeing up the rest of the economy to do what it does best, namely, succeed.