‘Unemotional data’ Show SA’s Tax Rate Compares Well With World Average

Author: Amanda Visser (BusinessDay)

South Africa has improved its ranking in the ease of paying taxes for a typical small and medium-sized company from 32nd to 24th, a position it last held in 2011, mainly due to the success of the electronic filing system for individuals and companies and the reduction in the total tax rate.

South Africa’s total tax rate of 30% compares favourably with the world average of 43% and Africa’s 52.9%, placing it in the 53rd position out of 189 economies that were measured in the Paying Taxes 2014 report released by the World Bank and professional services firm PwC.

PwC tax director Charles de Wet said at the African launch of the report in Johannesburg that Paying Tax 2014 provided “unemotional data” about tax systems around the world that acted as one of the drivers of global tax reforms.

He said there had been significant tax reforms since 2004 when PwC and the World Bank released the first report.The report measures the total tax rate of companies — which are comparable to the case study company in the report — in the 189 participating economies, the time it takes the company to be compliant and the number of tax payments the company has to make.

The case study company has a turnover of about R35m, started operations in 2011 and produces ceramic flowerpots and sells them at retail outlets. It does not participate in foreign trade and has 60 employers, including four managers and 48 workers.

The case study company has a total tax rate of 43%, it takes 268 hours to complete and file its tax returns and makes 26.7 tax payments.

The comparable South African company has a total tax rate of 30.1%, takes 200 hours to complete and file its tax returns and makes seven payments.

South Africa ranked 11th in this year’s report in terms of the number of payments compared with 32nd in the 2013 report, mainly due to e-filing. It ranks 80th in terms of the time it takes to comply.

South Africa also compares favourably to members of the Southern African Development Community (Sadc), whose average total tax rate was 37.2% and that of members of the Bric (Brazil, Russia, India and China) countries, whose average total tax rate was 55%.

It takes the comparable company in South Africa 200 hours to comply with its tax obligations, compared with 707 hours for the Bric countries, with Sadc averaging 209.8 hours.The Africa average is 329 hours.

PwC tax technical partner Kyle Mandy said the World Bank and PwC report on paying taxes had been handed to the committee of Judge Dennis Davis, which has been tasked by the finance minister to review the country’s tax system.

This article was first published on bdlive.co.za