Rh o d e s Un iv e r s it y
REDISTRIBUTION AND TAXATION IN SOUTH AFRICA
Inaugural lecture delivered at
RHODES UNIVERSITY on 17 April 1996
b y
PROFESSOR WESLEY J. GAVIN
DipTheol(London), BA(Theol)(UNISA), BCom(Hons)(UPE), CA(SA)FCA
GRAHAMSTOWN RHODES UNIVERSITY
First published in 1997 by Rhodes University Grahamstown
South Africa
@ Prof. W.J. Gavin Redistribution
and Taxation in South Africa ISBN: 0-8610-329-2
No part of this book may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers.
REDISTRIBUTION AND TAXATION IN SOUTH AFRICA
Inaugural lecture delivered at
RHODES UNIVERSITY on 17 April 1996
b y
PROFESSOR WESLEY J. GAVIN
DipTheol(London), BA(TheoI)(UNISA), BCom(Hons)(UPE), CA(SA)FCA
GRAHAMSTOWN RHODES UNIVERSITY
1997
REDISTRIBUTION AND TAXATION IN SO U TH AFRICA Wesley James Gavin
I would on this occasion like to pay tribute to Professor Brian Gardner of the University of Port Elizabeth, and formerly of the University of Fort Hare, who invited me to become an academic at the age of 43, and who with Professor Sean Ramsay-Slogrove changed me from a nuts-and-bolts accountant into an academic accountant, prepared to study theory, and to conceptualise.
Some dozen years ago I met my present head of department, Professor Peter Surtees, in a street in Grahamstown, and in the course of conversation found that we both believed that the best preparation for a professional accounting career at secondary level was the study of Mathematics and Latin. In tribute to him I have used Latin numbering for my headings in this lecture.
I propose to proceed to discuss the subject of taxation and redistribution in South Africa under the following headings:
I APPROACH T O TAX REFORM II WHY REDISTRIBUTION?
III CASH-FLOW COMPANY/BUSINESS TAX IV INDIVIDUAL INCOME TAX
V CASH FLOW TAX APPLIED T O INDIVIDUALS VI CAPITAL TRANSFER TAX
APPROACH TO TAX REFORM DEDUCTIVE, N O T INDUCTIVE
The accountant who ventures into the field of taxation theory is making contact with his roots. In 1994 we celebrated the quincentenary of the publication in Venice in November 1494 of a book on Mathematics written by a Franciscan monk and University professor called Luca Pacioli, in which he devoted a lengthy section to the description of the double-entry system of accounting, which in all essentials is still in use today. It is believed that the system had been in use for two centuries before Pacioli popularised it.
This in itself has nothing to do with taxation. However, long before Pacioli, in the cradle of urban society in Sumeria at the head of the Persian Gulf, syllabic writing was developed 5 600 years ago. W hen deciphered early this century, it was found to consist mainly of the taxation records of the city temples. W hen in 1952 Ventriss and Chadwick succeeded in deciphering Linear B, the mysterious script of the written records of the Minoan civilisation, what did they find? Tax records! It is not an exaggeration to say that the art of writing was invented by accountants for fiscal purposes. We should not forget that William the Conqueror's Domesday Book, which is such a mine of information for the historian, is a record of fixed assets in the form of land and buildings, and inventory in the form of livestock, and the purpose was a reform in the collection of taxes.
At the outset I must state that I am confining my remarks to the reform of Direct Taxation, and avoiding the minefield of Indirect Taxation. A bald, and not uncontroversial distinction between these forms of taxation is that direct taxes are levied on specific persons or organisations, for example, Company Tax and Income Tax, whereas Indirect Taxes are levied on a product or a service. Examples of this would be customs, excise, VAT or GST. Property taxes occupy a middle ground, but are usually classed as direct taxes. I am ignoring them also in this lecture.
Secondly, I must make it clear that I am not presenting, nor could I present, the results of empirical research. The field of tax reform is essentially deductive, a priori, normative. It is only some time after tax reforms have been adopted
that the economists can do empirical research to discover the macro-economic effects.
THE INTERNATIONAL DIMENSION
In saying the above it must not be thought that tax reform exists in a vacuum.
There is a huge literature on the subject. In the late 1970s there was evidence of a tax revolt commencing in many countries. The 1980s saw tax reforms in many countries of the world. As a result of the Regan report (1984) there was a major tax reform in the U nited States in 1985. Ireland had a tax reform commission in 1982, although most of its recommendations were subsequently rejected. New Zealand carried through a radical tax reform. In the United Kingdom there were major changes in 1984 and 1988. In South Africa the Margo report appeared in 1987, resulting in the substitution of VAT for GST.
Virtually all the OECD countries made changes to their tax rate structure.
Several South American countries have reformed taxes, as have Turkey, Malaysia and many countries of the Western Pacific rim. The latest group of countries to tackle tax reform, and in some cases build a new tax system from the ground up, are the former Warsaw Pact countries. And in South Africa, the Katz Commission is still sitting.
There are several themes running through these reforms. They generally contain the following factors:
■ Broadening the tax base by abolishing exemptions.
■ Closing the gap between the rates of company tax and the highest individual income tax rates.
■ Reducing all rates.
■ Reducing the number of rate bands.
■ Increasing reliance on VAT, at higher rates than in South Africa.
DESIRABLE CHARACTERISTICS OF TAX
Commencing from Adam Smith, writers on taxation have attempted to define criteria for a good tax system as a conceptual starting-point. (HM SO, 1982,- O'Brien, 1982,- Musgrave and Musgrave, 1984,- Regan, 1984,- Margo, 1987,- Kay and King, 1990) These writers have framed the criteria in various ways,
but generally include all or most of the following, with some variation in terminology. In the following schema, 1 have coined some of the terms:
Equity The burden of taxation should be related to the taxpayers ability to pay (Vertical Equity). Those equally placed should pay the same amount of tax (Horizontal Equity).
Neutrality Taxation should not affect decisions on allocation of resources (Economic Neutrality), legal form of the undertaking (Enterprise Neutrality), timing of cash flows (Price-Level Neutrality), or international trade relations, investment and choice of tax jurisdiction (International Neutrality).
Simplicity Taxes should be easy to calculate and certain in their application, thus reducing costs of administration for the taxpayer (Compliance Costs) and costs of collection for the fisc (Administration Costs).
A tax system characterised by equity, neutrality, in particular economic and price-level neutrality, and simplicity, is perceived as fair and reasonable by taxpayers, ensures a higher tax morality and improves voluntary compliance.
CONSTRUCTING A THEORETICAL BASE
The distinction between wealth and income is the same as that between the balance sheet and the income statement. Wealth measured at a particular time is a boundary, and income is the flow occurring in the interval between those boundaries. The opportunities for direct tax are taxes on wealth and on income. Taxes on wealth are an administrative and measurement nightmare, and are not a practical proposition, so we are left with taxes on income. This can only be measured where there is a movement of cash between people and organisations, as it crosses the boundary between them.
T he two options available for a theo retically justifiable tax base are Comprehensive Tax, which taxes all income, including changes in wealth, and a Consumption Tax, which excludes investments made from the tax base.
Assuming the Hicksian definition of income as consumption plus investment (Hicks, 1946), a direct consumption tax is levied on that part of income that is consumed. Many writers prefer to call it Consumption- based Income Tax.
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Fisher, because of his idiosyncratic definition of income, held strongly that a tax on consumption and a tax on income amounted to the same thing. He insisted that income invested represented the present value of future cash flows, and that only income consumed was true income (Fisher and Fisher, 1942). He used the term Income Tax. Kaldor, who did not agree with the Fisherian definition, used the term Expenditure Tax (1955).
I will argue that consumption is the best basis for taxation, and formulate my theoretical basis on this premise. In order to avoid complicated definitions and rules to decide when an outward cash flow is deductible from the tax base of the taxpayer, and when not, and whether or not it should be included in the tax base of the recipient, we should define the tax base in terms of the broadest and simplest of principles. I suggest that all cash outflows should be recognised simply as Investment Flows and Consumption Flows. Investment Flows are excluded from the tax-base of the payer, and conversely included in the tax-base of the recipient. O n the other hand, Consumption Flows are not excluded from the tax-base of the payer, and are included in the tax-base of the recipient. Initially, this latter would seem to be inequitable, a form of double-taxation, but the principle is deeply rooted in our present tax system.
It is difficult to imagine any direct tax system that could operate without it, unless the sole form of tax in the tax-jurisdiction were a wealth tax or property tax, or indirect taxation which is borne ultimately by end-users.
The starting point is the realisation, noted, among others, by Margo (1987), that only people, human individuals, bear tax. Income tax that is levied on a corporation, for example, is borne by the shareholders in the form of reduced dividends, by customers in the form of higher prices, by employees in the form of lower wages, or by varying combinations of these. Property tax levied on corporations, is recovered as a com ponent of the rents charged to tenants, or included in the prices charged to customers for goods and services. It is also obvious that only people can consume. Goods and services used by corporations are investments in future cash inflows.
A consumption tax can only be levied on people. O n this basis any corporation or other corporate body is viewed as merely a conduit, channelling income to individuals who form the tax-paying community. Consumption tax would be paid only by individuals. This appears a revolutionary suggestion. However,
6
if this definition of the taxpaying community and the tax-base is established, there is no reason why the substance of the tax should be reflected in the form. In the case of corporations, a tax on cash flow would amount in essence to a tax on dividends and interest paid. A consumption tax requires that these flows be taxed in the hands of the recipients. As it is desirable for simplicity of administration and the achieving of maximum compliance, that cash flows should be taxed at source wherever possible, what is in essence merely a withholding tax on interest and dividends paid, could be presented in the form of a Cash-flow Corporation Tax. This would overcome the political problem of apparently freeing "wealthy" corporations from taxation, while achieving the equitable goal of taxing those with the ability to consume, and therefore to pay tax.
MACROECONOMIC PROJECTIONS
As a mere accountant, I am unable to predict what the macro-economic effects of these proposals would be. However, they have been suggested by a wide range of economists, and some at least of the following tax framework has been successfully implemented in other countries.
II WHY REDISTRIBUTION?
THE EGALITARIAN IDEAL
In a country dedicated to democracy and equality, it is not to be expected that the financial circumstances of all citizens will be identical. Democracy means an equal say for each adult person in the choice of the way that the country is run. Equality means equality before the law, and as far as possible, equality of opportunity. However, in a democracy, enormous discrepancies between the position of the richer and poorer sections of the community are unacceptable. The greatest teacher of all time said that we would always have the poor with us, and human diversity and differences in ability ensure that situation. However, when the differences in circumstances are not due to differing ability, but to historical events and inherited privilege, it is incumbent upon a democracy to attempt some levelling.
SKEWED INCOME - SO U TH AFRICA
A number of studies have been made of the distribution of income in South Africa on racial and social bases, but I will use only the findings of the recent (1994) survey conducted by M cGrath and W hiteford. This shows that the Gini co efficient, a measure of the divergence of income distribution from equality, shows that of 36 countries compared, South Africa had the highest score of 0,68. Furthermore, the Gini coefficient for the country was the same in the two years studied by M cGrath, 1975 and 1991. O th er tables show that the per capita income of whites rose sharply from 1946 to 1970 to peak at 15 times that of Africans, and has fallen since then to 12 times. The 1980s, the period of sanctions, showed the real per capita income of all groups except Asians falling, with W hites falling faster than the others. The most disturbing feature is that the Gini coefficients calculated for each racial group rose in the period bounded by 1975 and 1991. This was most marked in the W hite and African groups, where the respective readings were 0,36 to 0,46, and 0,47 to 0,62. McGrath and W hiteford summarise their findings thus:
South Africa still has the highest known levels of income inequality in the world, and the gap between rich and poor is growing.
Equally disturbing is that the slight income flow from whites to blacks has gone to the richest echelons of black society, merely changing inequality from being race to class based.
W hat is the situation of the distribution of wealth in South Africa, and how has it come about? The vast majority of agricultural land is the hands of whites, and some of it not used productively. Increased sophistication of farming techniques drove small white farmers off the land, and led to the abandonm ent of thousands of hom esteads, and th e consolidation of landholdings into larger farms.
Owner-occupied residential property is obviously not a suitable target for redistribution. Another great area of wealth unevenly distributed is commerce and industry. 86% of shares on the JSE are controlled by six organisations. It can be argued that through pension funds, including those run by two of the Six, and those funds investing directly in securities, every pension fund member has part-ownership of most of the shares quoted on the JSE. However, none
of these having indirect ownership have any semblance of control, or say in the running of these organisations. Finally, we must not forget that the distribution of technical knowledge and training is very unevenly distributed in South Africa.
The last can be righted by aggressive training and education action, funded in part by the private sector. However, in the actual redistribution of wealth there is a role for taxation.
SKEWED WEALTH - UNITED KINGDOM AND IRELAND
The great discrepancies of wealth are not a phenomenon peculiar to South Africa. Kay and King (1990) show in a diagram the changing distribution of wealth in the UK. Distribution of wealth in Eire according to the O'Brien report (1992) showed a similarly skewed distribution to that in the UK. The measurement of wealth in these tables is problematic, because of the difficulty of valuation, and the exclusion of the present value of pension rights from the data. Nevertheless, they present a picture of grossly uneven distribution of wealth before the First World War in the UK gradually changing to a less uneven, but still very skewed distribution.
D I S T R I B U T I O N O F P E R S O N A L W E A L T H ( P E R C E N T A G E S ) S h a r e o f d if f e r e n t p e r c e n t i le g r o u p s in E n g la n d a n d W a le s
( U n i t e d K in g d o m a f t e r 1 9 6 6 ) P e r c e n t il e s 1 9 1 1
to 1 9 1 3
1 9 3 8 1 9 6 6 1 9 7 1 1 9 7 6 19 8 1 1 9 8 5
T o p 1% 6 9 5 5 31 3 1 2 4 21 20
T o p 5 % 8 7 7 7 5 6 5 2 4 5 4 0 4 0
T o p 1 0 % 9 2 8 5 6 9 6 5 6 0 5 4 5 4
T o p 2 0 % 7 7
S h a r e o f d if f e r e n t p e r c e n t i le g r o u p s in I r e l a n d
T o p 1 % 3 3
T o p 5 % 6 3
T o p 1 0 % 7 8
T o p 2 0 % 9 3
Figure 1
SOCIAL INSTABILITY
Great extremes of wealth and poverty must make for social dissatisfaction and unrest, and mere considerations of prudence should cause us to consider urgently the need for redistribution, quite apart from ethical considerations of fairness. As no ted above, discrepancies are fast veering from race differentiation to class differentiation.
TAXATION AS AN INSTRUMENT
W hat can be done to redistribute income by use of taxation? Very little, according to McGrath (1990), Dennis Davis (1992), Lieb Loots (1992), and Terence Mol (1993). All emphasise the desperate need for economic growth.
All agree that the best redistribution must come from changes in government expenditure to empower the poor, by provision of better medical services, education and technical training, and simple literacy.
N evertheless, redistribution also affects gen d er inequalities, and age inequalities, and taxation, I believe, can be made into an instrument of that without hindering economic growth, and in fact, assisting it.
Ill CASH FLOW COMPANY/BUSINESS TAX PURPOSE OF REFORM
There is an urg en t need to encourage savings and investm ent. T h e disincentives to savings and as a consequence, to investment, inherent in our tax regime, are a legacy of Keynes's view that excessive saving was an evil.
(Keynes, 1936; Tanzi, 1991) This view of savings was the reason for the continuance of the double taxation of returns on capital, against which John Stuart Mill had campaigned in the Nineteenth Century. (Kaldor, 1955) SHOULD CORPORATIONS BE TAXED?
Only natural persons can bear tax. Tax on companies is borne by their customers in the form of higher prices, by their employees in the form of lower remuneration, by their suppliers of capital in the form of lower earnings,
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or by a combination of these. The direction of the tax shift depends on the elasticities of demand and supply of goods and services, labour, and capital (Musgrave and Musgrave, 1989). Inelasticity in supply, which particularly characterises labour, shifts tax to the employee, whereas inelasticity in demand shifts tax to the customer.
The decision to tax companies is essentially a political decision, brought about by a desire to be seen to be taxing the wealthy more heavily (Vertical Equity).
The same results can be brought about by taxing distributions to shareholders, as I will argue later. However, for political reasons, as long as the tax is integrated into a consistent system with tax on individuals, there is no reason why it should not be described as Corporation or Company Tax.
CONSTRUCTION OF DESIRABLE BASE
In an article to be published shortly by De Ratione, I argue that full deduction from the taxable income of fixed investment in the year in which it is made removes inflation distortion from the tax base. This procedure should be extended to increases of investment in working capital. T he necessary concomitant of this deduction of investment is to add loan and equity capital raised to the tax base, and reduce it by loans repaid. At the end of all these adjustments, the inflation-proof company tax base is reduced to the tax itself, added to dividends declared and interest payments made.
Another reason for freeing funds invested from taxation, and taxing the disinvestment, and any other yield from it, is because it will encourage saving.
This it does by removing the tax-wedge, the difference between the return on an investment, and the return to the investor. This will encourage investment. It will also work to the advantage of the new entrepreneurs from the disadvantaged, as well as the historically advantaged sections of the community, by enabling them to meet the dem and for ever-increasing investment in working capital out of untaxed rands. They will be taxed only on the cash which they take from the business, and not also on the profits which are necessarily re-invested in the business in the growth phase, as they are at present. The proposal of the Katz Commission that small businesses should be taxed on a cash basis is another way of stating the same thing, but their proposal is far too limited, as it excludes investment in fixed assets.
A third reason for enabling investment to be made from untaxed rands is to encourage private investment, which is desperately needed in the South African economy. Assuming a marginal tax rate of 40%, an investment of R l0 0 under the proposed system would cost the investor exactly the same as an investment of R60 under the present system. It is reasonable to assume, and Fisher made precisely this assumption, that the investor under the more favourable dispensation would in fact increase his investment by 67% on a marginal tax rate of 40%. This would cause faster growth in the economy, with more jobs available, and more taxpayers to contribute to the State coffers.
TAXATION OF DISTRIBUTIONS
As mentioned above, the only tax paid by companies taxed on a cash flow basis would be on dividends and interest paid, namely, the payments to providers of capital. Traditionally, interest and dividends are treated differently for tax purposes, but the legal form of the investment, and the differing degrees of risk, have no bearing on their essential nature as payments for the use of capital. This tax, I suggest, would be fully imputed to the recipients of the payments, who could gross up the dividends and interest to the before-tax amount, and deduct tax at the standard rate on these amounts, in the same way as they deduct PAYE paid to the revenue authorities on their behalf by employers.
IV INDIVIDUAL INCOME TAX PROGRESSIVITY
There is no compelling reason why taxation of individuals should be on the basis of progressive rates, and that of companies on a flat rate. The first income tax in South Africa, introduced by Act 28 of 1914, imposed tax on companies and individuals alike at the same rate, and with the same threshold, £l 000.
The rate was on a sliding scale, and was a function of taxable income. This system endured for individual taxpayers until 1959. (Statutes..., 1959;
Statutes..., 1960) However, the first consolidating act, Act 40 of 1925, imposed a flat-rate tax of 2/6d in the £ on all non-gold-mining companies. Individuals experience a tax at the average rate which the total tax bears to their total incomes.
RATE
An accompanying reform to the reform of income tax on both companies and individuals, is the use of a flat rate tax coupled with a fairly high tax threshold for personal tax, the flat rate to equal the company tax. This will effectively achieve neutrality in choice of business form, as it will not be possible to manipulate taxation by forming companies. It also makes the average rate progressive, a point noted by Margo.
Incidentally, the flat rate personal income tax was discussed by the Regan Commission (1984) and proposed unsuccessfully as a com ponent of the Irish (O'Brien, 1982) and New Zealand 1988 tax reforms (Douglas, 1993). In the report of the O'Brien Commission, the reason for the recommendation was stated as follows:
Almost all the problems in the area of company taxation arise because company profits are charged to tax at a flat-rate, while income tax on individuals is charged at progressive rates. This results in the use of companies for tax avoidance purposes.
(O'Brien, 1982:39)
In 1986 Jamaica introduced a flat rate of 33,5% with a fairly high threshold for households equal to twice the GDP per capita. This excluded the poor from paying income tax. At the same time a forest of exemptions was removed.
The reform was intended to be fiscally neutral, but within two years, the yield from income tax had risen from 9,3% to 11,5% of GDP. (World Bank, 1991) The success seems to have continued, because in 1993 the rate had been reduced to 25%. (Coopers and Lybrand, 1994).
I suggest a flat-rate tax of 40% on income of individuals, with a threshold of R 14 000. The most obvious advantage of 40% is that it is less than 50%. This is not without significance. W hen individuals know that they will receive the greater part of increasing income, the opportunity cost of leisure increases.
Incidentally, the GDP per capita in South Africa on a GDP of approximately R522 billion in 1995 was about Rl 2 500 per annum, on an estimated population of 41 - 42 million.
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FAMILY PREMIUM
The Margo Commission drew attention to the so-called Marriage Penalty, and recommended the separate taxation of marriage partners. The gradual phasing in of this recommendation was completed by the final equalisation of the tax rates on all taxpayers, male and female, married and unmarried, when it was realised that the differential tax according to sex and marital status was in conflict with the equality provisions of the Constitution.
I heartily agree with this, but suggest a slight amendment to the procedure.
Assuming, say, a tax threshold of R l4 000 p.a. for every actual or potential taxpayer, I suggest that where in a marriage one partner earns more than that amount, and the other less, or even nothing, the unused exemption on the lesser-earning partner should be made available to the other. This would mean that, in the case of a married couple where the wife or husband earned less than R 14 000, and the other partner more than R l4 000, there would be no liability for taxation unless the joint income exceeded R28 000. This is done in Germany, the Netherlands and Norway (Cooper and Lybrand, 1994). This provision would ease the burden of taxation on the poor, and consequently be a redistributive measure. In case of divorce, neither spouse would be able to pass on unused threshold deductions to the other, but maintenance payments would be included in the taxable income of the recipient, and deducted from that of the provider. This might persuade the principal earning spouse to be more generous to the other, in view of the saving of tax at the standard rate on all support given.
This suggestion might arouse opposition on the grounds that it discriminates in favour of those who are married, and against those cohabiting without marriage, or in a polygynous marriage situation. However, it is nonsense to suggest that the State has no interest in the stability of family relationships, or the right to favour legal marriage. W here there is no sanction against informal relationships, the children of the union very frequently become a burden on the State. Furthermore, it is in the interests of women that the State encourages formal and monogynous marriage, as they suffer much more than men when an informal relationship terminates.
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COMPARISON OF TAX AND AVERAGE TAX RATES TAXABLE
INCOME
PRESENT TAX
AVERAGE RATE
NEW RATE (SINGLE)
AVERAGE RATE
NEW RATE (FAMILY)
AVERAGE RATE
15000 0 0 400 0 0 0
20000 840 4,2 2400 12,0 0 0
30000 2940 9,8 6400 21,3 800 2,7
40000 5940 14,9 10400 26,0 4800 12,0
60000 14140 23,6 18400 30,7 12800 21,3
80000 22740 28,4 26400 33,0 20800 26,0
100000 31540 31,5 34400 34,4 28800 28,8
150000 54040 36,0 54400 36,3 48800 32,5
200000 76540 38,3 74400 37,2 68800 34,4
300000 121540 40,5 114400 38,1 108800 36,3
400000 166540 41,6 154400 38,6 148800 37,2
500000 211540 42,3 194400 38,9 188800 37,8
40% Flat rate / R14 000 threshhold
Present rates —+— New Rate (Single) New Rate (Family)
WITHHOLDING TAX
It must be obvious that the introduction of a flat rate tax would greatly simplify the administration of PAYE. No more tax tables! No more elaborate algorithms!
In order to reduce evasion to a minimum, all income to taxpayers should be paid subject to deduction of the flat-rate tax, allowing them to claim the tax paid against their own liability for tax. In the case of low paid employees, allowance could be made for the spouses income, to avoid refunds on PAYE.
It would constitute an invasion of privacy, but the taxpayers could decide whether or not to take advantage of the provision for earlier receipt of tax relief.
SOCIAL SECURITY TAX
A feature of the various tax reforms on the international scene is a growing realisation that dedicated taxes do not remain dedicated once they reach the state coffers. Social Security taxes create a huge cost in administration. It is far better for the state to budget for social benefits, and raise tax rates to finance them, than to seek to collect the funds in the form of pay-roll taxes.
South Africa's only example of that is the Unemployment Insurance deduction, and that is onerous enough.
V CASH-FLOW TAX APPLIED T O INDIVIDUALS HOUSEHOLD EXPENDITURE
In defining consumption, the point of departure would be the basic needs of humanity, namely, food, shelter and clothing, in that order. This covers all basic household expenses. Shelter would include maintenance and furnishing of the dwelling unit. In addition today, in an age permitting of leisure, it would include all expenses relating to entertainm ent and travel, culture of the mind, and sport. Difficult areas are the distinction between the investment and the consumption elements of outward cash flows relating to an owned dwelling, and expenditure on education.
