This is how much South Africa’s ‘Big Four’ banks are worth to the government

 ·28 Mar 2024

A recent report by PwC revealed that South Africa’s top four banks paid over R37 billion in direct taxes during the 2023 fiscal year – with individual payments ranging from just over R4 billion to almost R13 billion.

PwC’s latest Major Banks Analysis Report was compiled on Standard Bank, Absa, FirstRand, and Nedbank, following their results ending 31 December 2023.

According to the report, the combined headline earnings of these four banks rose by 13.8% to R113.2 billion in 2023.

Their revenue benefitted from higher interest rates, balance sheet growth, and efficiencies from the digitalisation of their services, said PwC. 

“Despite slow growth conditions in South Africa and the challenging macroeconomic environment that prevailed globally, regionally and domestically throughout 2023, South Africa’s major banks’ results exhibited their solid operating foundations.

“Aided by the positive endowment effect of the higher interest rate environment, the major banks continued the performance trajectory observed in the first half of the year, albeit under more difficult trading conditions than may have been anticipated at the start of the year and with the effect of interest rates on impairment charges more visible,” the firm added.

Market volatility also benefitted their trading revenues. 

Despite the increased risk outlook, major banks maintained resilient balance sheets with capital and liquidity well above regulatory requirements. Unprecedented levels of balance sheet provisions were made in anticipation of forecasted risks.

How much tax the ‘Big Four’ pay

South Africa’s ‘Big Four’ banks paid a combined R37.73 billion in direct tax in the first half of 2023 – R2.45 billion more than the R35.28 billion paid in 2022.

Standard Bank was the largest taxpayer, paying R12.72 billion in direct tax. FirstRand was the second-largest taxpayer, paying R12.59 billion.

Absa paid R7.98 billion in direct tax, whilst Nedbank paid R4.43 billion.

The report shows that the four banks paid a significant amount in direct tax, which is an important source of revenue for the South African government.

Direct taxes are taxes that are paid directly to the government, such as income tax and corporate tax.

Based on Efficient Group’s data, the three largest contributors to the government’s tax revenue are Personal Income Tax (PIT), Value-Added Tax (VAT), and Corporate Income Tax (CIT).

Out of the total revenue of R1.95 trillion, PIT contributes R640 billion (33%), VAT accounts for R471 billion (24%), and CIT provides R336 billion (17%).

Only 1.12% of taxpayers in South Africa, which is roughly 163,702 people, pay 30% of the total personal income taxes in the country. On the other hand, 19% of taxpayers pay a whopping 87% of the total personal income taxes.

However, the situation gets even worse when you look at Corporate Income Tax (CIT).

A staggering 0.09% of corporate taxpayers, which is only 770 companies, pay 62.5% of the total CIT, and 4.4% of the corporate taxpayers pay 95% of the total corporate income taxes.

As shown by the report, the four major banks in South Africa are among the largest taxpayers in the country.

This is because they are large and profitable businesses which generate a significant amount of income, and subsequently pay a significant amount of income tax.

To put this into perspective, the estimated CIT (Corporate Income Tax) revenue, according to Efficient Group, is R336 billion. In 2023, these four banks alone accounted for 11.2% of the total CIT paid to the government.

The payment of direct tax by the four banks is a positive development for the South African economy.

It demonstrates that the banks are contributing to the government’s revenue base, which in turn is utilised to fund essential public services like education, healthcare, and infrastructure.

BankDirect tax paidYoY change
Standard BankR12.72 billion+R2.80 billion
FirstRandR12.59 billion-R196 million
AbsaR7.98 billion-R258 million
NedbankR4.43 billion+R102million
TotalR37.73 billion+R2.45 billion

Read: Old Mutual on track to launch new bank in South Africa

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