Chief economist at Economists.co.za, Mike Schussler says that across the three major tax categories, South Africans carry one of the heaviest tax burdens in the world in two of them.<\/p>\n
Speaking on the SAFM Market Update<\/a><\/strong>, Schussler noted that when it comes to personal income tax and company tax, South Africa’s tax rates are among the highest globally – easily in the top 10 – while the country’s VAT rate (15%) is somewhere in the middle.<\/p>\n However, despite these high rates, the country still sits with a massive R57 billion tax gap, <\/a><\/strong>with the latest South African Reserve Bank quarterly bulletin also showing revenue collections coming in under projections.<\/p>\n The Reserve Bank’s data shows that the government derived revenue from taxes on income, profits and capital gains of R191 billion (60.1% of total revenue) in April\u2013June 2019 – 7.8% more compared to the same period a year ago.<\/p>\n This increase mostly reflected a 12% year-on-year increase in personal income tax collections to R126 billion. However, corporate income tax collections remained broadly unchanged at R56.7 billion.<\/p>\n Revenue from taxes on goods and services increased only marginally to R108 billion (33.8% of total revenue) in the first quarter of fiscal 2019\/20.<\/p>\n Domestic value-added tax (VAT) collections increased by only 6.6% year on year in the first quarter of fiscal 2019\/20 compared to the originally budgeted increase of 7.2% for the full fiscal year – missing targets.<\/p>\n This probably reflects the impact of slowing wage and household consumption expenditure growth on VAT collections, the SARB said.<\/p>\n Due to a marked year-on-year increase of 27.2% in VAT refunds to R57.4 billion, net VAT collections decreased by 3.5% to R73.0 billion in April\u2013June 2019.<\/p>\n Filling the tax gap<\/strong><\/p>\n According to Schussler, the government will “undoubtedly” look to personal income tax<\/a><\/strong> to fill its tax hole, as it will be the most accessible tax to tap into.<\/p>\n The economist said that government has a few options:<\/p>\n However, he warned that those taxes will not be enough to fill South Africa’s tax hole.<\/p>\n “Although people won\u2019t always realise it, if they actually don\u2019t change income tax brackets to inflation – which they haven\u2019t done much, and specifically the 40% bracket; they haven\u2019t done that for three or four years now – they get more tax.<\/p>\n “So the one tax, the ultimate, is the personal income tax – despite the fact that some people are losing their jobs. So, that\u2019s a scary thing for us South Africans,” Schussler said.<\/p>\n The economist stressed that South Africa’s taxpayer base has run out of legroom, with the only available option to cut spending.<\/p>\n He said that the government is aware of this, evidenced by its move to try to get tax income from South Africans working abroad (via the so-called ‘expat tax<\/a><\/strong>‘), as well as an increase seen in tax avoidance or financial emigration.<\/p>\n “I think you\u2019ll find a lot more people have tried to circumvent taxes…I see a lot of things going on at the moment, where people are just trying their best not to pay those taxes,” he said.<\/p>\n “And I think in terms of VAT (earnings) decreasing – consumers are obviously trying to buy smaller items and VAT-free items.”<\/p>\n Ironically, this just leads to more ‘punishment’ with higher taxes on the personal income tax side, Schussler said.<\/p>\n “If (the SA government) are going to be spending and not bring expenditure down – we are going to see more tax hikes. That\u2019s it.”<\/p>\n\n
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