Foreign Tax

South African Tax Agency Reports On Tax Trends

…..reports 26% tax-to-GDP ratio for 2015/16

The South African Revenue Service (SARS) has released the 2017 edition of its Tax Statistics report, covering the agency’s performance over the 2013 to 2016 tax years.

A news report on the latest SA’s tax statistics report for the four year period ended year 2016 by showed that it came amid criticism of the agency on the alleged grounds that it had failed to meet revenue collection targets.

Only last month, the Government announced that an inquiry would be launched into the agency’s perceived failings.

In its latest report, the agency disclosed that revenue from Personal Income Tax (PIT), as a percentage of total tax revenue, increased from 29.6 percent in 2007/08 to 37.2 percent in 2016/17.

It stated: “This robust performance allowed Government to offer large scale tax relief to all South Africans. This is despite the fact that the minimum tax thresholds for taxpayers below the age of 65 has increased from ZAR40,000 (USD3,118) in the 2007 tax year, to ZAR73,650 in the 2016 tax year.”

SARS also highlighted that the report showed that a taxpayer earning taxable income of ZAR100,000 in 1995 would have paid tax at a rate of 33.8 percent, adding that the tax burden has fallen considerably since with someone earning the same income, after adjusting for inflation, paying an effective tax rate of 18.3 percent in 2016.

SARS listed the key findings of this year’s report to include, tax revenue grew by 6.9 percent year-on-year, supported by personal income tax, which grew by 9.4 percent; and that the tax-to-GDP ratio was 26 percent for 2015/16, slightly below the peak of 26.4 percent in 2007/08.

Other findings in the report are that net value-added tax collections were up 2.9 percent year-on-year, despite economic growth of less than one percent. VAT refunds grew by 8.7 percent; and that revenue collected from import taxes, import VAT, and customs duty declined by one percent and 1.5 percent, respectively.

The news report stated further that although in the recent past South Africa had been very successful in expanding its taxpayer base, going from just 1.7m registered taxpayers in 1994 to 16.8m in 2014, revenue growth had started to tail off in recent years.

The implications of these developments for government are that that with revenues failing to keep up with spending, the inevitable result has been a widening budget deficit, which the government has found difficult to contain.

As expected, the blame has fallen on the tax agency.

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