{"id":174231,"date":"2017-05-10T12:30:08","date_gmt":"2017-05-10T10:30:08","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=174231"},"modified":"2017-05-10T12:30:08","modified_gmt":"2017-05-10T10:30:08","slug":"most-personal-income-tax-is-paid-by-only-a-fraction-of-south-africans","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/174231\/most-personal-income-tax-is-paid-by-only-a-fraction-of-south-africans\/","title":{"rendered":"Most personal income tax is paid by only a fraction of South Africans"},"content":{"rendered":"

The deputy CEO of a South African non-governmental organisation recently tweeted that close to 80% of personal income tax is contributed by 1.7 million individuals. But, as with most things to do with tax, the truth is not that simple.<\/p>\n

The deputy CEO of AfriForum<\/a>, a non-governmental organisation which seeks<\/a> to protect \u201cthe rights of minorities\u201d, with \u201ca specific focus on the rights of Afrikaners\u201d, outlined a \u201ctragic truth\u201d in a recent tweet<\/a>.<\/p>\n

\u201cIn South Africa, about 1.7 million people (roughly 3% of the population) pay about 80% of income tax,\u201d Ernst Roets tweeted. At the time of publishing, the tweet had been retweeted close to 200 times and liked 155 times.<\/p>\n

One of our readers<\/a> asked that we verify the figure.<\/p>\n

No source provided<\/h3>\n

Roets declined to provide Africa Check with his source and asked that we publish his reasons<\/a> for doing so.<\/p>\n

We then approached the South African Revenue Service<\/a> (SARS), which directed Africa Check to the 2016 tax statistics report<\/a>, produced annually in conjunction with the national treasury.<\/p>\n

The report aims to<\/a> \u201cpresent comprehensive tax revenue data in a manner that will complement and help contextualise economic and demographic data provided by other publications\u201d.<\/p>\n

The latest version highlights that R389.3 billion<\/a> in personal income tax was collected by the revenue service in 2015, out of a total of R1.07 trillion tax.<\/p>\n

Total tax collected (2015\/2016)<\/h3>\n

A breakdown of the main contributors of tax revenue for the 2015\/2016 fiscal year.<\/p>\n

\n
\n\n\n\n\n\n\n\n
Tax type<\/th>\nContribution to total tax (%)<\/th>\nAmount<\/th>\n<\/tr>\n
Personal income tax (including PAYE)<\/td>\n36.4%<\/td>\nR389.3\u00a0billion<\/td>\n<\/tr>\n
Value-added tax<\/td>\n26.3%<\/td>\nR281.1\u00a0billion<\/td>\n<\/tr>\n
Other (including fuel levies and custom duties)<\/td>\n19.2%<\/td>\nR206.2\u00a0billion<\/td>\n<\/tr>\n
Company income tax<\/td>\n18.1%<\/td>\nR193.4\u00a0billion<\/td>\n<\/tr>\n
Total<\/td>\n100.0%<\/td>\nR1,070.0 billion<\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<\/div>\n

The South African Revenue Service cites Personal Income Tax as the main contributor to revenue growth for the year under review. Personal Income Tax alone accounts for 36.4% of total collected tax for the 2015\/2016 fiscal year.<\/p>\n

Only reports on 71.9% of personal income tax<\/h3>\n

The document, however, only reports on 71.9% of the total collected personal income tax (or R239 billion of personal income tax). This tax is called \u201cassessed tax\u201d.<\/p>\n

SARS media executive Sandile Memela<\/a> explained that assessed income tax refers to the tax paid by individuals who submit income tax returns and pay provisional tax.<\/p>\n

Provisional tax<\/strong> refers<\/a> to tax on income earned from anything other than \u201cremuneration, an allowance or advance\u201d as described in the Tax Act<\/a>.<\/p>\n

Memela told Africa Check that taxpayers who have \u201calternative income streams such as rental or investment income\u201d have to register as provisional taxpayers. They are then required to pay tax upfront in the form of provisional payments twice a year.<\/p>\n

Pay-as-you-earn (PAYE)<\/strong> refers to the tax that is deducted from employees\u2019 salaries and employers then pay to SARS.<\/p><\/blockquote>\n

The figure reported in the tax statistics publication does not include<\/strong> all income tax paid to SARS.<\/p>\n

Income taxpayers who only pay tax through PAYE deductions and aren\u2019t required to submit tax returns<\/a> are excluded<\/strong>, the treasury told Africa Check.<\/p>\n

\u2018In principle, the figures are reasonable\u2019<\/h3>\n

Assessed taxpayers had a total taxable income of R1.3 billion and owed SARS R268.5 million for 2015.<\/p>\n

There were 1,821,394 individual taxpayers in the 7 highest income groups (people who earned more than R250,001 per year). These individuals collectively contributed R239 million (89%) of assessed income tax that year.<\/p>\n

But, as explained above, this total excludes taxpayers who paid income tax through PAYE but are not required to submit a tax return for assessment.<\/p>\n

Deborah Tickle<\/a> is a tax partner with auditing firm KPMG and a member of the Davis Committee<\/a>, a body established to \u201cassess South Africa\u2019s tax policy framework\u201d.<\/p>\n

She told Africa Check that verifying a claim like this is difficult as \u201cthe source and date that the numbers were derived [from] are not provided. However, in principle the figures are reasonable.\u201d<\/p>\n

Tax year 2015 (71.9% assessed)<\/h3>\n
\n
\n\n\n\n\n\n\n
Income group<\/th>\nNumber of taxpayers<\/th>\nTax assessed<\/th>\n<\/tr>\n
<0 \u2013 R70 000<\/td>\n623 938<\/td>\nR15 million<\/td>\n<\/tr>\n
R70 001 \u2013 R250 000<\/td>\n2 343 002<\/td>\nR29.3 billion<\/td>\n<\/tr>\n
R250 001+<\/td>\n1 821 394<\/td>\nR239.2 billion<\/td>\n<\/tr>\n
Total<\/strong><\/td>\n4 788 334<\/strong><\/td>\n R268.5 billion<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<\/div>\n

Budget review data \u2018far more user-friendly\u2019<\/h3>\n

Professor Matthew Lester, a faculty member<\/a> at Rhodes Business School<\/a> and also a member<\/a> of the Davis Committee, suggested we consider revenue estimates in Treasury\u2019s Budget Review<\/a>.<\/p>\n

These figures are \u201cfar more user-friendly,\u201d Lester noted, as they consider all<\/i> taxpayers and not just assessed taxpayers as is the case with the annual tax statistics report.<\/p>\n

The most recent budget review is for 2017\/2018<\/a> and shows that just over 1.9 million registered taxpayers are estimated to contribute just over 80% of income tax.<\/p>\n

In 2016\/2017<\/a>, just over 1.7 million taxpayers were estimated to have contributed 78% of taxes, closer to Roets\u2019 claim.<\/p>\n

While these figures are estimates of expected tax revenue, Lester noted the process of collecting tax returns for assessment can be lengthy.<\/p>\n

\u201cThat\u2019s why it\u2019s better to work with the estimates and what they ultimately expect to receive, as per [national treasury] numbers\u201d Lester added.<\/p>\n

Ingrid Woolard, dean of the commerce faculty at the University of Cape Town and fellow member of the Davis committee, added that SARS\u2019 assessed tax data \u201cdoesn\u2019t actually tell us anything about the number of people that pay tax nor about the number earning more than R350,000 [annually]\u201d.<\/p>\n

Treasury Budget Review tax estimates<\/h3>\n

A comparison of estimated tax revenue and taxpayers from the 2015\/2016 fiscal year to the 2017\/2018 fiscal year.<\/p>\n

\n
\n\n\n\n\n\n
Budget Review<\/th>\nTotal registered taxpayers<\/th>\nRegistered taxpayers in income group R350,001+<\/th>\nTotal tax collected<\/th>\nTax collected from taxpayers (R350,001+ income group)<\/th>\n<\/tr>\n
2015<\/td>\n15 459 513<\/td>\n1 470 506<\/td>\nR393.9\u00a0billion<\/td>\nR259.8 billion (65.95%)<\/td>\n<\/tr>\n
2016<\/td>\n13 736 046<\/td>\n1 727 885<\/td>\nR441.0\u00a0billion<\/td>\nR346.5 billion (78.57%)<\/td>\n<\/tr>\n
2017<\/td>\n13 993 926<\/td>\n1 916 957<\/td>\nR482.1\u00a0billion<\/td>\nR388.3 billion (80.54%)<\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<\/div>\n

The latest budget review data for the 2017\/2018 fiscal year estimates more than 1.9 million taxpayers will contribute just over 80% of collected tax.<\/p>\n

Each dataset has limitations & drawbacks<\/h3>\n

Christopher Axelson, \u200ea director at national treasury in the personal income taxes and saving division, told Africa Check that while both datasets could be used to check a claim like this, each comes with its own set of limitations and drawbacks.<\/p>\n

Budget review data \u201cshows a more complete view of the taxable income distribution, but is only an estimate and actual changes in the distribution may have been different in practice,\u201d Axelson told Africa Check.<\/p>\n

\u201cThe SARS data illustrates final tax collections, but only indicates this for individuals who filed an assessment,\u201d Axelson said and added it is therefore \u201can incomplete view of the distribution\u201d.<\/p>\n

Conclusion: The claim is mostly correct<\/h3>\n

To provide an accurate fact-check, it is essential to know the source and timeframe considered. Without these, the burden of proof<\/a> moves from the speaker to the fact-checker.<\/p>\n

SARS and treasury officials, together with consulted experts, directed Africa Check to annual tax statistics and budget review data as the best tax-related information. But both data sources have limitations.<\/p>\n

While the latest tax statistics fall close to Roets\u2019s claim (namely, 1.8 million individuals contributed 89% of income tax), these figures aren\u2019t inclusive of all taxpayers.<\/p>\n

Treasury budget review data for 2016\/2017 is in the same ballpark (1.7 million taxpayers contribute 78% of income tax) and takes into account all taxpayers, but these figures are estimates. The latest treasury estimates show 1.9 million individuals are expected to contribute an estimated 80% of income tax.<\/p>\n

Given that claim requires clarification, we rate it mostly correct.<\/p>\n

Edited by Kate Wilkinson – This article was first published by Africa Check<\/a><\/strong>, read the original here.<\/em><\/p>\n

\n

Read:\u00a0South Africa\u2019s richest face three new wealth taxes: report<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa Check has tested the accuracy of recent claims that 1.8 million people in South Africa pay 80% of the taxes, and found that, while not giving the complete picture, it’s still pretty accurate.<\/p>\n","protected":false},"author":40,"featured_media":87782,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[9731,26],"class_list":["post-174231","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-africa-check","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/174231","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/40"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=174231"}],"version-history":[{"count":4,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/174231\/revisions"}],"predecessor-version":[{"id":174251,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/174231\/revisions\/174251"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/87782"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=174231"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=174231"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=174231"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}