“BUT HOW WILL WE PAY FOR IT”? Financing a UBIG

The document argues that a UBIG in South Africa is fiscally feasible through progressive taxation and economic stimulus effects. It estimates the gross annual cost of a grant set at the Food Poverty Line (R624/month) at R255 billion, though actual costs would be lower based on uptake rates (R153 billion at 60% and R204 billion at 80%). The net cost is further reduced by a 'multiplier effect' and VAT recoupment, with the document suggesting that the net cost could be as low as 50% of the gross cost. Proposed funding sources include a social security tax, a wealth tax on the top 1% (potentially raising R143 billion), luxury VAT, and the reduction of retirement fund subsidies.

• The gross annual cost of a UBIG paid to all adults aged 18 to 59 at the Food Poverty Line (FPL) of R624 per month is R255 billion. However, based on historical grant uptake, the cost would be approximately R153 billion per year (7% of the 2022/23 budget) at 60% uptake, and R204 billion per year (8% of the projected 2025/26 budget) at 80% uptake.
• The net cost of a UBIG is significantly lower than the gross cost due to VAT recoupment and the 'multiplier effect' of increased local economic activity. Approximately 12% of grant money is recouped through VAT; for an 80% uptake scenario, this equals R24 billion.
• The document argues that progressive taxation is the most effective way to fund a UBIG to ensure poverty alleviation and inclusive growth, as regressive taxes like VAT can cancel out the benefits of the grant.
• A proposed social security tax (SST) would act as a 'clawback' mechanism where high-income earners pay more than they receive in benefits, potentially covering around 25% of the UBIG's cost.
• Combined effects of revenue generation, a progressive SST, and lagged uptake could result in a net cost as low as 50% of the gross cost.
• Several specific alternative revenue sources are identified: a wealth tax on the wealthiest 1% (340,000 people) could raise R143 billion annually; a 25% VAT on luxury goods could raise R9 billion annually; and a Financial Transactions Tax (FTT) of 0.1% could generate R41 billion annually.
• Subsidies on retirement fund benefits are estimated at R133 billion in total (R87 billion on contributions and R46 billion on investment returns), which the document suggests could be redirected to benefit poor households.

APA

Institute for Economic Justice (2022). “BUT HOW WILL WE PAY FOR IT”? Financing a UBIG. https://www.iej.org.za/wp-content/uploads/2022/12/IEJ-UBIG-7-fact-sheet-web.pdf

Chicago

Institute for Economic Justice. “BUT HOW WILL WE PAY FOR IT”? Financing a UBIG. 2022. https://www.iej.org.za/wp-content/uploads/2022/12/IEJ-UBIG-7-fact-sheet-web.pdf.

Wikipedia

{{cite report |author=Institute for Economic Justice |title=“BUT HOW WILL WE PAY FOR IT”? Financing a UBIG |date=November 2022 |url=https://www.iej.org.za/wp-content/uploads/2022/12/IEJ-UBIG-7-fact-sheet-web.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{instituteforeconomicjustice2022but, author = {{Institute for Economic Justice}}, title = {{“BUT HOW WILL WE PAY FOR IT”? Financing a UBIG}}, institution = {Institute for Economic Justice}, year = {2022}, month = nov, url = {https://www.iej.org.za/wp-content/uploads/2022/12/IEJ-UBIG-7-fact-sheet-web.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }