This is who really pays tax in South Africa

National Treasury and the South African Revenue Service (SARS) have published the annual Tax Statistics for 2022.

The 2022 edition provides an overview of tax revenue collections and tax return information for the 2018 to 2022 tax years, as well as the 2017/18 to 2021/22 fiscal years.

The latest data also provides a 10-year overview of taxpayers in a cohort of approximately 3 million people who have been submitting returns every year over the period.

According to SARS, the economic recovery from the Covid-19 pandemic differed from previous negative shocks to the economy in that recovery in tax collection has been incredibly swift.

“After the 2008/09 global financial crisis, it was several years before tax revenue collections recovered to pre‐crisis levels as a proportion of income and consumption. Due to the strong economic recovery from the pandemic , tax revenue increased by R314.1 billion to R1 563.8 billion for the year ending 31 March 2022,” it said.

The recovery in tax revenue was noticeable across all tax types, but especially for corporate income tax due to the escalation in commodity prices, as well as domestic taxes on goods and services, that were most impacted on by the lockdown measures induced by the pandemic.

Total tax revenue collected by SARS increased from R1 216.5 billion in 2017/18 to R1 563.8 billion in 2021/22, growing at a compound annual growth rate (CAGR) of 6.5% over this period. This is significantly lower than the CAGR of 8.4% attained in the previous five-period from 2012/13 to 2017/18.

Personal Income Tax (PIT) at 35.5%, Value-added Tax (VAT) at 25.0% and Corporate Income Tax (CIT) at 20.7%, in aggregate remain the largest sources of tax revenue and comprise 81.2% of total tax revenue collections.

The tax-to-GDP ratio moderated from 23.8% in 2019/20 to 22.3% in 2020/21, followed by an increase to 24.9% in the year under review.

Personal income tax

By 31 March 2021, the Personal Income Tax (PIT) register had grown on an annual basis by 4.1% to 23.9 million individuals.

The number of individuals expected to submit income tax returns was 7.1 million for the 2018 tax year. This count decreased to 6.8 million for 2020 and then to 6.4 million for 2021, due to the increase in the threshold for submission of returns, over the past few years, SARS said.

More recent years saw the adoption of auto-assessments for taxpayers, which boosted the number of taxpayers being assessed overall.

The population of taxpayers who were identified to be auto-assessed in the 2020 filing season was significantly expanded to just more than 3.4 million. Assessed data for individual taxpayers indicated that, of the 6,388,532 taxpayers expected to submit returns for the 2021 tax year, 5,508,525 (86.2%) taxpayers have been assessed, the revenue service said.

Who pays tax

SARS’ data shows that tax revenue from personal income tax is still concentrated at the top.

Only 17.9% of South African taxpayers earn over R500,000 a year, but make up 52% of all taxable income in the country.

According to SARS, Gauteng still accounts for the largest number of taxpayers, with 2,177,191 (39.5%) of assessed taxpayers registered in the province.

Over 726,600 of assessed taxpayers lived in the Johannesburg Metro and were taxed on an average taxable income of R446,739.

1,432,673 (26.0%) of assessed taxpayers were aged between 35 to 44 years and 2,859,926 (51.9%) of assessed taxpayers were male and 2,613,130 (47.4%) were female. 35,469 (0.6%) taxpayers couldn’t be identified in terms of gender.

Assessed taxpayers had an aggregate taxable income of R1.8 trillion and tax liability of R388.1 billion. The average tax rate was 21.4% compared to 22.3% the previous tax year; and income from salaries, wages and other remuneration as well as pension, overtime and annuities, accounted for 77.2% of total taxable income.

Most of the Pay as you Earn (PAYE) tax contributions came from the Financial Intermediation, Insurance, Real Estate and Business Services sector, followed by the Community, Social & Personal Services (which includes government employees).

Other taxes

Stats around Company Income Tax (CIT) reveal that out of the 1,028,832 companies assessed as at August 2022 for tax year 2020, 21.4% declared a positive taxable income, whilst 53.2% had taxable income equal to zero and the remaining 25.4% reported an assessed loss.

In 2021/22, 80.0% of active Value-added Tax (VAT) vendors were companies and close corporations, contributing 92.7% to Domestic VAT payments and accounting for 91.9% of VAT refunds paid out.

“Although individuals (sole proprietors) comprised 14.8% of active VAT vendors, they only contributed 2.3% of Domestic VAT payments and received just 1.2% of VAT refunds,” SARS said.

Import VAT and Customs Duties accounted for 13.1% and 3.7% of the year’s Total Tax Revenue respectively, resulting in a 16.8% aggregate, which was below the 17.2% average over the preceding five fiscal years.

The combined share of these taxes to GDP increased to 4.2% from the preceding five-year average of 4.0%; with Import VAT and Customs Duties contributing 3.3% and 0.9% for the year respectively.

For the 2021/22 fiscal year, import VAT was collected mostly from the importation of Machinery and Electronics (25.6%); Chemical Products (14.2%); Vehicles, Aircraft and Vessels (9.7%); Special Provisions (8.9%); Base Metals (7.5%); Plastics and Rubber (5.5%); Textiles and Clothing (5.0%) as well as Mineral Products (4.0%).

The largest contributors to Customs Duties in 2021/22, were Vehicles, Aircraft and Vessels (22.7%); Textiles and Clothing (17.3%); Food, Beverages and Tobacco (14.8%) as well as Machinery and Electronics (13.3%).

The overall effective tax rate for Total Import Tax was 11.9% compared to previous year’s 12.0%. Key commodities with the highest effective Total Import Tax rates were Footwear and Accessories at 43.6%; Hides, Skins and Leather at 37.0% and Textiles and Clothing at 30.0%.

Other Taxes and Collections provide information about taxes such as Capital Gains Tax (CGT), Transfer Duty, Mineral and Petroleum Resources Royalty (MPRR), Southern African Customs Union (SACU) payments and Diesel refunds.

In 2021/22, CGT of R16.2 billion was raised, of which R7.7 billion was attributable to individuals and trusts and R8.5 billion to companies. An aggregate of R189.3 billion has been raised since the introduction of CGT in October 2001, with R88.6 billion from individuals and trusts and R100.6 billion from companies.

Mineral and Petroleum Resources Royalty (MPRR) payments by extractors grew quite substantially by R14.2 billion (100.0%) to R28.5 billion due to a significant improvement in the commodity prices such as platinum, iron ore as well as coal.

“This growth was at an exponential growth rate when compared to the growth achieved in the 2016/17 financial year of R2.1 billion (56.5%),” SARS said.

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