CAPE TOWN – The 2019 edition of the annual Paying Taxes report, produced by PwC and the World Bank Group this week revealed that tax authorities could do more to realise the full potential of new technology to reduce the tax compliance burden on taxpayers.
The report found that the global average results for the compliance burden for business taxation were almost unchanged across four key measures: time to comply (237 hours); number of payments (23.8); Total Tax and Contribution Rate, or TTCR (40.4 percent), and Post-Filing index (59.6 out of 100).
“Paying Taxes, 2019 draws upon a comparison of the taxation of business in 190 economies. The report models business taxation in each economy using a medium-sized domestic case study company,” read the report.
The report illustrates how developments in tax software, real-time reporting systems and data analytics are transforming the capabilities of tax administration. Some advanced economies have continued to improve their systems to the benefit of both taxpayers and tax authorities, recording significant decreases in the time it takes to prepare, file and pay taxes and in the number of payments indicator.
Yet, the report notes that the size of the gains in 2017 is relatively small in global terms. The fact there has been little change to the global average, despite 113 economies introducing tax reforms over the same period, suggests reforms are limited in nature (the report does not include the US tax reforms introduced in 2018 due to the data cut-off date for this edition of the Paying Taxes report).
Now in its third year, the Paying Taxes post-filing index provides insight into the tax compliance burden that a business may face once it has filed its tax returns. The post-filing process for VAT and corporate income tax (CIT) returns, which are considered in the study, can be amongst the most challenging and lengthy processes for businesses to comply with.
Kyle Mandy, tax policy leader for PwC South Africa said the time it took to obtain a VAT refund in South Africa had reduced from the 26.6 weeks published in the 2018 report as this was reassessed.
“This is still somewhat longer than what we experience in practice, but resulted in an improvement in South Africa’s post-filing index score. It will be interesting to monitor this for further improvements over the next few years as the South African Revenue Service clears the backlog of VAT refunds referred to in the October mini-budget and undertakes reforms in this regard.”
South Africa’s overall position in the rankings - 46th - remains unchanged from the 2018 published report.
South Africa has a slightly better than average post-filing index of 60.3, compared to the Africa score of 56.0, and 59.6 globally.
South Africa performs reasonably well for the time it takes to obtain a VAT refund – 16.6 weeks, compared to the global average of 29 weeks, and 38.6 weeks in the African region. In South Africa, it also takes 8.5 hours to comply with a VAT refund, compared to the global average of 19.6 hours.
Rita Ramalho from the World Bank Group said: “Technology is transforming the nature of jobs that are available and the skills needed to do them. This in turn is likely to require greater investment in human capital, especially in learning and development. It is therefore vital that governments are able to understand the challenges ahead and how they can build resilience for public finances in the long term. We hope that this report will be of value to all those interested in making tax systems more efficient, whether in government, business, academia or civil society.”