Why do we pay taxes?
Many people dislike paying taxes because they don't see the value it brings directly to them. Governments provide public services such as police services and roads to the public. The government also pays the salaries of civil servants.
The public does not pay directly for these goods and services or for the time of public servants when they visit government offices but indirectly by means of Taxation. The government must therefore regularly decide how much to spend, what to spend it on and how to finance its expenditure. This is the reason why we pay taxes. We all want government services such as better education, more policing and better roads. All these things cost money. The government is faced by continuous demands to increase its expenditure as people want more goods and services from the government.
These demands include free houses and free basic services such as electricity and water. The provision of these services to the needy paid for by means of taxes raised from the more fortunate, amounts to a large redistribution of income from the payers to the recipients. The finances of a government are much like that of a household, although the amounts spent by government far exceed that of a household as its responsibilities are much larger. The government has expenditure and requires income to cover such expenditure. People do not like to pay taxes but nevertheless expect the government to supply them with goods and services. It is therefore important for the government to make sure that taxpayers feel they get the value for the money paid.
Types of taxes in South Africa
South Africans pay a number of taxes to fund the government's expenditure. The most important of these are personal income tax, company tax and value-added tax.
Personal income tax
Personal income tax is paid on income earned.
Value-added tax commonly known as VAT is the second important form of government revenue. VAT is charged on all transactions and paid on most purchases. Only a small number of payments and fees for instances, penalties and license payments are VAT exempt. All people irrespective of whether they are poor or wealthy pay VAT.
Corporate Income Tax
The third important source of government income is company tax. When companies make profits, these profits are subject to tax. If many companies are profitable, the government will collect more tax income that can be used to provide services for the needy.
What happens if I do not pay my taxes?
It is illegal not to pay taxes and such action is known as tax evasion. SARS can penalise you by means of a fine or you can go to jail. The government needs tax income to fund its activities and all people have a civil responsibility to pay their fair share of the tax burden. If everybody pays their fair share, the tax burden on everybody will be smaller.