Another growing threat for taxes in South Africa: SARS

The South African Revenue Service (SARS) has flagged the country’s high youth unemployment rate as a potential future problem for the country’s taxes.

The concerns are highlighted in the revenue collector’s annual performance plan for 2021/2022, which details some of the key issues facing the group and how it plans to address them.

“South Africa is a country of young people, as recent statistics released by Stats SA indicate. The same is true for our current individual tax base,” it said.

“The high, and growing, unemployment amongst the youth is a serious threat to the tax base and the overall integrity of the tax system. It has become a serious constraint to revenue growth and will cause further strain on government to increase spending on social benefits.”

Statistic South Africa’s latest unemployment numbers for the fourth quarter of 2020, showed that South Africa’s unemployment rate hit its highest point in 12 years at 32.5%.

In the fourth quarter of 2020, the official unemployment rate for young people (aged 15–24 years) was 63.2%, a 1.9% increase from 61.3% in the third quarter of 2020, AfricaCheck reported.

Youth continue to be hit 

Data published by the National Income Dynamics Coronavirus Rapid Mobile Survey (NIDS-CRAM) on Wednesday (12 May), shows that the country’s move to introduce harsher lockdown restrictions at the start of 2021 also impacted churn in the job market.

The NIDS-CRAM is a study conducted by a national consortium of 30 social science researchers from local universities, as well as groups like the Human Sciences Research Council and the Department of Education.

Between October 2020 and January 2021 there was still significant churning in the labour market with about one-fifth of those employed in October not employed in January, and about a fifth of those not employed in October finding work in January.

Rates of job finding among the non-employed were similar across age groups, while job loss was strongly and negatively correlated with age.

Comparing outcomes for youth (18-24), prime-age adults (25-40) and middle-aged adults (41-55) it is clear that the youth were most affected by job losses.

Job loss for the youth was more than double (-31%) job losses for middle-aged adults (-13%) and also much higher than for prime-age adults (-19%).

Read: A third of South Africa’s middle-class set to be wiped out: lender

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Another growing threat for taxes in South Africa: SARS