JOHANNESBURG - A study by the World Bank and PricewaterhouseCoopers (PwC) released yesterday said that there was a risk that the total tax rate in South Africa would increase as pressure mounts to introduce new taxes on business to fund increasing spending pressures NHI and education.
The Presidency has already directed Treasury to “identify and finalise proposals for revenue-enhancing measures amounting to about R15 billion, including where appropriate, tax measures.” This is one of the areas the government is looking into as it struggles to address the roughly R40 billion gap that has been identified in the Medium-Term Budget Policy Statement.
The Paying Taxes 2018 study further said that it takes more than six months in South Africa to get a Value Added Tax refund.
Kyle Mandy, tax policy leader for PwC, said the lengthy post-filing process for VAT and corporate income tax (CIT) returns could create cash flow and administrative delays for companies of more than a year.
“The primary area where improvement could be made is on corporate income tax where South Africa’s time to comply of 96 hours is above the world of 61 hour, while Africa averages 77 hours,” Mandy said. The report examines the ease of paying taxes in 190 economies.
South Africa’s Tax Ombud has previously taken a hard stance against the SA Revenue Service for delaying refunds due to companies and taxpayers.
In September the Tax OmbudJudge Bernard Ngoepe found that the revenue service’s systems unfairly delayed payment of refunds to taxpayers. This ombud said the delays resulted in financial hardships to businesses and, in some instances, the near collapse of their businesses, while in other cases the loss of jobs had taken place.
“A number of complaints that the payments of refunds were unduly delayed were justified; the refunds could and should have been paid earlier,” said Judge Ngoepe. The ombud's remarks followed an investigation the office launched earlier this year after it had received more than 400 complaints dating as far back as 2013.
Sars last month said that an amount of R100.6 billion in VAT refunds had been paid this year. The revenue services further said Value-Added-Tax (VAT) refund payments increased from R162.1bn in the 2014/15 financial year to R167.1 billion in 2015/16, and R181.5 billion in 2016/17.
The Paying Taxes report also found that South Africa was a leader when it came to the number of payments due to the widespread use of electronic payment systems - ranked 14th.
The country’s total tax and contribution rate compared relatively favourably with global and regional averages where it is ranked 42nd. However, South Africa ranked behind a few of its regional neighbours such as Zambia, Namibia, Mauritius, and Botswana.
The report further found that South Africa made relatively low use of labour and other taxes compared to other countries.
However, South Africa had a relatively high rate of profit taxes of 21.7 percent, which was well above the global and Africa averages of 16.3 percent and 18.3 percent, respectively.
Rita Ramalho, the acting director, Global Indicators Group, Development Economics, World Bank Group said: “The continued reduction in the burden of paying taxes, in time and number of payments, is welcome news indeed.”
“The use of technology can provide significant benefits for both taxpayers and tax collectors, and we look forward to its increased use in efforts to improve the ease of doing business for medium-sized enterprises in countries around the world.”