Infoliability And Equitability

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Recommended: similarities of progressive tax and a regressive tax

According to Mohr and Fourie (2004), the tax burden should be spread equitably among the various taxpayers. Equitability (fairness) can be described using two principles, the ability to pay principle and the benefits received principle.

Benefits received principle, according to Case et al (2014), is a fairness/equity theory that says citizens should contribute in proportion to the benefits that they receive from the public expenditure. E-Tolling is a good example of this as it conforms to the benefits received principle, where e-toll users pay for their usage of the toll roads in proportion to the benefits they derive/receive. SANRAL is charging a levy/tax that has to be paid for the usage of the road. If you use the road more than other users you pay more, if you use the road less you pay less. What you pay is proportional to your usage. The money collected is then used to build and maintain the toll roads. In the case of e-Tolling, it is regressive and unfair as the poor pays a higher percentage of their income than the rich.

According to Case et al (2014), the ability to pay principle is a fairness/equity theory that says citizens should bear tax burdens in line with their ability to pay taxes. Those who can earn more should pay more, the rich should subsidise the poor, as with income tax. This was not implemented on the e-tolling case as SANRAL is applying the benefits received principle to toll the road users. It could have been applicable if SANRAL had decided to use a “road access” tax collected through SARS, deductible straight from income like PAYE. Only then will the ability to pay principle be applicable. This is progressive in nature and is a fair system for the poor as everyone pays the relative to their income and ...

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...the estimated revenue per month is about R396Million. Increasing the price slightly to 40c/km would result in monthly revenues of R528Million as the quantity will not change due to the inelastic demand. However, in this case, government only received about 9% of the invoiced revenue while the rest (91%) has not been collected. It is not going to be easy for SANRAL to get that money paid as it has already threatened users with legal action or jail time and still users are not paying.

Consumer surplus
Consumer surplus is the difference between the maximum price that a consumer is willing to pay for and the current market price of goods or services (Case et al, 2014). In this scenario, consumer surplus will be greatly reduced since the users were not paying anything for the roads before the upgrades (except through taxes and fuel levies, which they are still paying).

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