South Africa’s tax base has grown dramatically over the past few years. SA Revenue Service (Sars) commissioner Oupa Magashula told Parliament’s standing committee on finance yesterday that the number of individuals registered rose from 5.2 million in the 2007/08 fiscal year to 10.3 million in 2010/11, while companies registered increased from 1.6 million to 2.1 million.
A determined effort by Sars, since its inception in 1998, had brought many previously unregistered taxpayers into the tax net and closed loopholes that previously encouraged tax avoidance and evasion on a grand scale. The improvement in tax compliance increased flows to the fiscus and allowed individuals routine tax relief.
The higher standard of tax morality had cushioned South Africa from the worst of the global crisis. Countries like Greece, with its poor tax compliance track record, were forced to borrow beyond their means. Revenue flows had been resilient since the recession of 2008/09, partly due to Sars’ good work and as employed South Africans did well.
“While job losses most certainly occurred during this period, our figures suggest that most of these losses occurred in the lower-income groups, most of whom were below the tax threshold,” Magashula said.
While growth in personal income tax slowed from 15.6 percent in 2008/09 to 5.1 percent in 2009/10, it then bounced back to growth of 10.6 percent and 10.3 percent in the following two fiscal years.
Magashula said the statistics highlighted the increased earning and upward mobility of South Africa’s workers.
“In 2007 only 5.5 percent of assessed taxpayers had taxable income above R400 000 – but this (surged) to 8.8 percent by 2010.”
The trend reflected above-inflation pay increases, often in double digits, in recent years.
The modernisation of the collection system had paid off, with on-time filing up from 58 percent in 2008/09 to 80.7 percent in the 2010/11 tax season.
Magashula cited vastly improved turnaround times for assessment and refund payments, which “has allowed more accurate enforcement of return submissions… including through administrative penalties”.
Figures for corporates are less satisfactory. Magashula said the percentage of assessments completed on time for companies liable to submit returns was 54.6 percent for 2007, 44.5 percent for 2008, 37.5 percent for 2009 and 28 percent for 2010.
“Part of this is due to the 12 months allowed for companies to submit returns after their financial year-end. And a company can choose its year-end, so a January company submitting a 2010 return is allowed to submit it in January 2011.”
But a greater part of the apparently tardy filing was attributed to “ the inadequacy of the registration information we have for companies, many of which are listed as active but in reality are either dormant or non-existent”.
He promised a “ clean-up of the register” and said Sars was working with other government departments to ensure companies were registered for tax.
VAT registrations had declined by 80 000 between 2008 and 2011. But this was positive as it was “part of an ongoing clean-up of the register which Sars has been conducting as part of our focus on bogus VAT registrations and attempts to defraud the fiscus via illegitimate VAT claims”.