33% of taxes come from individuals. This is made up of 6 million taxpayers of whom 1.5 million are below the threshold of submitting tax returns. This is up from 1.7 million taxpayers in 1994. The average rate of tax paid by individuals is 21%.
We often hear that South Africa is the most unequal country when it comes to distribution of income, so it is not surprising that 10% of individuals pay 57% of personal income tax.
The next highest category is indirect taxes – VAT (25.7%) and Fuel Levy (4.9%). As this is a consumption tax it is borne by all citizens. Over the past several years, there has been a boom in retail spend driven by black consumers and this confirms that taxation falls on all the people of the country. The fact that taxis contribute substantially to the fuel levy underlines this.
Corporate South Africa pays 20.6% of taxes. This sector has been under pressure since the 2008 global slump and only one in three corporations actually pay tax.
The remainder of tax collections comes from Customs and Excise (4.6%), Secondary Tax on Companies (STC or dividend tax) 3% and then “other” makes up the balance.
How do we compare globally?
On a corporate basis we compare reasonably well – our overall average rate is 33% as opposed to 44% globally and 57% for the rest of Africa. This puts us at 59th position out of 179 countries.
On an individual basis we are amongst the higher taxed nations – our top rate is 40% whereas the average global maximum rate is 28.9%. As this includes all countries it is perhaps best to compare South Africa to the BRICS (Brazil, Russia, India, China and South Africa) – Russia’s rate is 13%, Brazil’s 27.5%, India’s 30% and China’s 45%. We are still high on this basis.
On the indirect front, our VAT rate of 14% is relatively low versus other countries including the BRICS (Brazil 17%, Russia 18%, India 12.5% and China 17%).
In the past several years, SARS has considerably improved revenue collections. If we look at the three different sectors (corporate, individuals and indirect), we are probably close to global averages. We also know the government will continue to try and improve the lives of the poorer communities – more than 1 million more people to receive social grants, National Health Insurance etc. It looks as though tax increases could therefore be coming – and a VAT increase looks like the most likely option.
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