A lifestyle spending its way to extinction

Recently I was pleasantly surprised when charged R900 for a 100km taxi trip to Heathrow. Back in SA the next day the fare was R500 for a 30km run in an equivalent vehicle. A UK taxi is now cheaper than an SA one!

SA’s fuel price of R9.70/litre compares very favourably with R15/litre in the UK and Europe. The difference is the UK tax on fuel. So if SA’s fuel taxes are now R2.61/litre, in the UK they are R7.50/litre. Nearly three times as much!

Even achieving a 50% margin, the UK taxi driver made less than R100 an hour for five hours on the road. But he was very happy to get the job. Times are hard in the UK. But how do they survive?

They live in small rented flats with no servants or gardeners. UK energy prices have increased by 20% this year but a flat is so much less to heat than an SA-style house.

They don’t pay for a big dog and a security company to make up for the police. Or pay an insurance company for when the dog and security company under-deliver.

So, even though the UK VAT rate has recently been increased to 20%, it doesn’t hurt because they don’t spend so much. Especially if one takes into account the very generous basket of VAT zero-rated food and clothing.

Kids are educated at the expense of the state and National Health insurance keeps them off medical aid. They get a social pension at the age of 66. And for holidays they fly Ryanair to Europe at R120 return (provided they don’t take deodorant or more than 10kg of hand luggage).

The UK and European economic woes didn’t seem to stress my taxi driver. Even at R40 a pint in a pub and R50 for a pack of cigarettes, he can still make it.

And I spent the flight home wondering: “Have we got it right with our monster lifestyles in SA? Or are we not just making ourselves juicy targets for the SA Revenue Service?”

GST, now known as VAT, was implemented in SA on July 4 1978, at 4%. It caused chaos in the Free State because they hadn’t seen percentages yet. But the old Receiver of Revenue, Mickey van der Walt, assured SA that GST was only a temporary measure until the economy rallied and township violence abated.

Today, VAT, customs and excise duties and fuel levies already amount to 40% of total tax collections, and growing fast. You can get the best tax consultant, but it’s pretty useless if you can’t stop spending.

Originally published in the Sunday Times.

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