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Country Rankings - South Africa

  • Jul 20, 2018   South Africa: automates

    Given that most taxpayers can connect to the internet, the announcement by the South African Revenue Service (SARS) that it is withdrawing some paper forms to encourage higher rates of e-filing might not be too bad of an idea. Indeed, considering what's been going on at SARS recently, with the investigation into allegations against its former head and revenue collection failings, it's probably a good thing all round that human intervention is being removed from the tax collection process.
    Source: https://www.tax-news.com/news/South_Africa_Drops_Paper_Forms_To_Encourage_EFiliing____86866.html

  • Nov 13, 2017   South Africa: rumblings

    While exciting times might lay ahead for American taxpayers, these are unsettling times for taxpayers in South Africa. There's a ZAR50bn black hole in the Government's Budget (that's about USD3.5bn), a budget deficit that's being revised upward seemingly by the month (now expected at 4.3 percent of GDP instead of 3.1 percent), the prospect of unending tax increases to fill the gap, rumblings of discontent among taxpayers and talk of a tax "revolt," and a new investigation into the South African Revenue Service's competence as a competent authority. And all this against a backdrop of corruption allegations and official ineptitude. Now the finger-pointing has begun. The Government blames SARS for weak revenue collections, and the taxpaying public for their "weakening tax morality." Taxpayers blame the Government for its largesse with public money. And I wouldn't be surprised if SARS blames both the Government and taxpayers for the mess. Hold on to your seat as I say it but I do feel a modicum of sympathy for the tax man in this case. For SARS has managed to expand South Africa's taxpayer base hugely over the last 25 years or so. In 1994, there were just 1.7m registered taxpayers. By 2014, it had grown the base to almost 17m. Admittedly, not all registered taxpayers have to pay tax. But it's a remarkable feat all the same. What's more, playing the blame game isn't going to solve anything. But ultimately, from where I'm sitting, it looks like it's the Government that needs to get its house in order. Whatever happens though, you can bet your bottom dollar (or maybe that should be rand) that it'll be taxpayers who pay the price for the clean-up operation. Indeed, Finance Minister Malusi Gigaba has already softened up taxpayers to expect the inevitable in next year's Budget, announcing in his recently announced Medium Term Budget Policy Statement that tax increases are necessary. As to which taxes will rise, you can pretty much take your pick.
    Source: https://www.tax-news.com/news/South_Africa_To_Launch_Inquiry_Into_Tax_Revenue_Shortfall____75705.html

  • Aug 09, 2017   South Africa: double tax

    But just when you thought the US tax regime was a pretty bad example to the rest of the world to follow, up steps South Africa, which has had a string of execrations recently. Yes, in a similar vein as the US, South Africa has proposed the removal of the 183-day foreign-earned income exemption in certain situations. Those certain situations, it seems, are when an expat resides in a jurisdiction with very low or non-existent taxes, which means they could be getting away with being doubly non-taxed. But the proposal has led to inevitable concerns that expats will end up being doubly taxed instead. The Government argues that the foreign income exemption was put in place at a time when South Africa had far fewer double tax avoidance treaties than it does today. It assures those taxpayers likely to be affected by the new rule – if introduced – that tax credits will be available to prevent situations of double taxation arising. Although I imagine applying for a foreign tax credit is unlikely to be a comforting prospect for those who currently don't need to. What's more, this is yet another worrying sign of the fiscal times for South Africa, and one wonders which direction the Government will move next in its quest for more revenue.
    Source: http://www.tax-news.com/news/South_African_Expats_Face_Higher_Tax_Bills____74895.html

  • Jul 18, 2017   South Africa: mess

    Something else that is becoming commonplace is South Africa's seemingly insatiable appetite for tax revenue. Indeed, the poor country appears to be in a right old fiscal mess! This is no laughing matter of course if you happen to be a taxpayer or investor in South Africa. And news that the most recent round of tax hikes, announced in the 2017 Budget earlier this year, have had virtually no impact on revenue streams, will probably be making you nervous. Because this can only be leading to one thing: yet more tax hikes. South Africa has managed to avoid tax increases of the more damaging variety in recent years. By which I mean personal income tax for low- and middle-income taxpayers (i.e. the majority of voters), value-added tax (which affects all voters), and corporate tax (which affects large investors). Indeed, it is somewhat surprising, even though it would be an unpopular move, that the Government has taken up the option of increasing the standard rate of VAT; at 14 percent, it is comparatively low, and raising it was a key recommendation of the Davis Committee on tax reform. Corporate tax, although relatively high at 28 percent, would probably be a politically-acceptable way to increase additional revenue, but might not be sound policy economically, especially given the alarming slide in the country's rate of economic growth. Nevertheless, I don't think I'd be sticking my neck out too much to suggest that it's not a question of if more tax hikes are coming, but rather where and when they will fall.
    Source: http://www.tax-news.com/news/South_Africas_Tax_Reforms_Fail_To_Increase_Revenues____74703.html

  • Jun 21, 2017   South Africa: ill-advised

    It is difficult to pretend that the world isn't unequal in terms of distribution of wealth. According to the OECD, across the grouping, the wealthiest one percent of taxpayers hold 19 percent of total wealth, while the bottom 40 percent holds three percent. The usual remedy for such inequality is progressive taxation, and the OECD says that diminished progressivity in tax systems as well as increasing tax competition between jurisdictions is putting additional pressure on public finances to fund social programs. It calls for countries to introduce more equitable property taxes; strengthen inheritance and gift taxes; pursue capital tax reforms to reduce rate differentials across assets; and bolster global governance of tax policy. But, this is a very vexed question, because most countries already have progressive taxation of incomes in place, and the wealthiest few percent tend to pay the bulk of income tax revenue already. Take one recent statistic from South Africa as an example: according to the South African Institute of Race Relations, a free market think tank, 60 percent of personal and corporate income tax comes from just 560,000 individuals and 610 companies. The counter-argument to “soaking the rich” is that the targets of wealth taxes will merely up sticks and take their income, assets, and employment-supporting businesses elsewhere to be taxed less punitively. This certainly seems to be what the IRR fears will happen in South Africa if a wealth tax is brought in. And given the precariousness of the South African economy, perhaps it does have a point. The evidence seems to suggest that inequality is still rampant all over the world in spite of progressive taxation. So would even more progressive taxation really help? Perhaps it's time for the political class to seek more imaginative solutions.
    Source: http://www.tax-news.com/news/South_Africa_Urged_To_Drop_New_Wealth_Tax_Proposals____74446.html

  • Mar 30, 2017   South Africa: combustible

    That said, the South African Revenue Service seems to be actively trying to make itself disliked. Not only is it about to be investigated by the Tax Ombud on charges of deliberately withholding tax refunds to make its revenue collection figures look better, it has also called for Judge Dennis Davis to be removed as head of the eponymously named tax review committee. These are worrying times for South Africa; the Government is busy attempting to head off economic and fiscal crises, but it appears to be doing so with one arm tied behind its back. Recent and serious claims of corruption have gone to the heart of government, and its unelected officials seem to be faring little better in the public eye, with Davis having alleged that the "erosion of the integrity of SARS was one of the biggest challenges facing South Africa today" – allegations that are behind SARS's call for Davis's removal from his own tax committee. Not being acquainted with the day-to-day workings of SARS, perhaps the tax authority is entirely justified in describing Davis's accusations as "unprovoked and unwarranted." Then again, taking the tax refund probe into account as well, perhaps a case no smoke without fire?
    Source: http://www.tax-news.com/news/South_African_Tax_Agency_To_Be_Probed_Over_Late_Refunds____73774.html

  • Mar 08, 2017   South Africa: worrying

    To South Africa now, and much more than a few tweaks will be required to guide this country away from the rocks. If most estimates turn out to be correct, economic growth slowed to less than a crawl last year (0.1 percent), and such stagnation isn't going to help the Government rein in a budget deficit that looks likely to have exceeded 3.5 percent of gross domestic product last year. Indeed, if South Africa were in the European Union, it would have undergone the EU's dreaded excessive deficit procedure by now, and suffered the indignity of having Commission officials running the rule over its fiscal affairs. South Africa does of course have a very unique set of problems to deal with, mostly linked to the end of the apartheid system over 20 years ago and the assimilation of millions of economically and politically disenfranchised people into society. But on recent evidence, the Government looks to be the architect of many of its problems, particularly by letting spending outpace even the stellar growth in tax revenues. This has resulted in significant tax rises in the last three budgets, including the one announced recently by Finance Minister Pravin Gordhan. And the way things are going, more tax hikes are on the cards.
    Source: http://www.tax-news.com/news/South_African_Budget_Lines_Up_Tax_Hikes____73570.html

  • Sep 06, 2016   South Africa: predictable

    Another country that has undergone a fairly extensive review of its tax regime is South Africa. But you could argue that it didn't really need to go to the trouble, because its tax regime is viewed quite positively already. According to Paying Taxes 2016, South Africa, where it takes 200 hours to comply with business tax obligations, is 20th overall, with a fairly creditable total tax rate (the combination of corporate, labor and other taxes) of 28.8 percent. The Government should of course take every opportunity it can to find and correct weaknesses in its tax regime. It's just that I suspect the Davis Tax Committee review was established by the Government more as a guide to where the goose could be plucked with the minimum amount of hissing, given the deteriorating fiscal climate. Problematically, the review, if anything, has merely highlighted the fact that the Government's options are limited. There's little scope for hiking income taxes, the report appeared to suggest, because doing so would likely encourage tax avoidance and damage South Africa's already fragile economy. There seems some mileage in increasing revenue through the VAT system, especially as the rate, at 14 percent, is well below VAT rates seen across Europe. The trouble is, VAT is a regressive tax, and the Government is probably keen to avoid a scenario where it's accused of hiking tax on the poor. Interestingly, the report concluded that, in comparison to other large emerging economies, South Africa's regime is only "slightly progressive." In a sense, this conclusion might have been music to the Government's ears, for it gives it a great excuse to go and make the tax regime more progressive. This could mean tax hikes for high-earners and the wealthy. Also, the big mining companies, which have been in the Government's sights for a number of years, could be in line for higher taxes. Not that I'm in the profession of forecasting. But if I were a betting woman... In the end, the Davis tax reports probably contained few things that the Government didn't know already. You could say it was a case of "ask a silly question, get a very predictable answer." But it's not the only Government that's been guilty of this particular crime recently.
    Source: http://www.tax-news.com/news/South_Africa_Tax_Reform_Committee_Issues_Final_Report____72077.html

  • Mar 01, 2016   South Africa: wait and see

    Now to South Africa, and it's only a month since the Government finally enacted legislation giving effect to measures announced in the 2015 Budget, and already the 2016 Budget announcement has come and gone. Indeed, the parliamentary procedures of some countries really does make my mind boggle sometimes. Often, when you're trying to track the progress of a particular tax announcement, you might find that that the initial budget legislation has been split into two or more separate bills, some of which might have been put out for consultation, others fast-tracked through the assembly, or shunted into the siding for consideration at some ill-defined later date. The South African law-making progress feels a bit like this sometimes. However, it's not the finer points of parliamentary procedure in South Africa I wish to dissect here, but the 2016 Budget itself. It raises taxes, by about the equivalent of USD3.25bn over the next three years, and doesn't appear to cut any taxes. Also, it felt as if the tax increases were hidden behind the headline announcement that 2015's income tax hikes wouldn't be repeated. So surely South Africa's in line for an execration this week? Well, no actually. I'm going to give Finance Minister Pravin Gordhan the benefit of the doubt. He's only been back in the job a matter of weeks, and it might take a little more time for his more cautious fiscal stance to play out. Because it was beginning to look like South Africa was at the top of a slippery fiscal slope, with spending outstripping tax revenue, the budget deficit growing, and economic growth slipping. Let's see if he can pull the country back towards safety.
    Source: http://www.tax-news.com/news/South_African_Budget_Hikes_Taxes____70538.html

  • Nov 09, 2015   South Africa: baffling

    Clearly, no single nation is going to tackle climate change alone. Which is why heads of state from around the world met ahead of the Paris climate talks last month to urge countries and companies to put a price on carbon. However, pricing carbon sounds fine in principle, but how do you do it in practice? Different countries have chosen different ways to go about this, from straight taxes on carbon emissions to more complex market-based mechanisms. And nobody really knows yet what the optimum carbon pricing system should look like, including me, because there just isn't enough data to assess the various schemes. But I'm going to stick my neck out and say that the ideal system won't look like South Africa's proposed carbon tax, the draft legislation for which I had the pleasure of reading the other day as part of another project. All I can say is, if your company is likely to be caught up in the carbon tax, and you've been given the thankless task of working out your firm's carbon tax liability, you better brush up on your math. The following is taken from section 6 of the draft Carbon Tax Act: "The amount of tax payable by a taxpayer in respect of a tax period must be calculated in accordance with the formula: X = {(E - D - S) x (1 – C) x R} + {P x (1 - J) x R} + {F x (1 - K) x R}." See what I mean? I'm not sure what's more baffling: the equation itself, or how the Government thought it was a good idea in the first place. And, unfortunately, South Africa has a bit of a bad track record when it comes to baffling tax laws and legislative processes, so it gets an execration.
    Source: http://www.tax-news.com/news/South_Africa_Consults_On_Carbon_Tax_Legislation____69593.html

  • Aug 24, 2015   South Africa: off-message

    It is to South Africa I turn to next. In 2013, the Government set up a committee of tax experts to review the country's tax system. The overarching aim of this exercise is – in the words of the Government – to "assess our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development, and fiscal sustainability." It's a sentence that could have been lifted word-for-word from an OECD report on tax-to-GDP ratios. But it's actually fairly easy to translate this official-speak: for phrases like "inclusive growth" and "fiscal sustainability," read "more spending and more tax." Being the cynic that I am, I suspect that the Government probably set up the Davis Tax Committee, as it has come to be known, in the hope that its conclusions would help to justify its argument for certain tax rises, particularly to mining taxes and VAT. The IMF was also commissioned to write a parallel report on the South African tax system, presumably to hammer home the need for more "inclusive growth" and "fiscal sustainability." The Davis Committee is refreshingly off-message however, concluding recently that there is no need for mining taxes or the VAT to be increased. Predictably, the IMF sees scope for more revenue to be raised from the resources sector. Given that the contribution of mining taxes has fallen to just 2 percent of overall revenues, this might not be such a bad thing after all; it would prevent the need for income tax and VAT increases, which would have a more widespread impact on the economy. The Davis Committee's conclusions also signal that South Africa's tax system is actually functioning better than many supposed. I wonder if the Government will see it that way. Usually the recommendations of tax reform panels are ignored by governments. This could prove to be an exception to that rule!
    Source: www.tax-news.com/news/South_African_Review_Against_Higher_Mining_Taxes____68880.html

  • Jul 27, 2015   South Africa: backfires

    It remains to be seen whether the conclusions of South Africa's Davis Tax Reform Committee, led by Judge Dennis Davis, will be acted upon by the Government or quietly shelved. I suspect this process will lead to some changes, but mainly to wring more revenue out of the tax system; the Government has admitted that the budget deficit is growing, but it intends to increase public spending. Last week, the Davis Committee released two options papers on the subject of value-added tax reform. One of the terms of reference of the committee is to consider ways in which the South African VAT system can be made more efficient. Or, in other words, how the Government can raise more tax from the system for less effort. However, inconveniently for the Government, South Africa's VAT regime is already one of the most efficient in world, according to the conclusions of an IMF report, which was actually commissioned by the Government to support the work of the Davis Committee. Therefore, the IMF said, there is limited scope for improvements to VAT in South Africa. It's quite a delicious irony really. The IMF is routinely heard to tell countries to widen their tax bases, and the Government was probably hoping for the same response to justify some stealthy revenue-raising measures of its own. If that was the plan, it's certainly backfired. But the Government will probably make the changes it wants to make anyway, IMF or no IMF.
    Source: www.tax-news.com/news/Davis_Committee_Seeks_Taxpayers_Input_On_VAT_Reform____68566.html

  • Mar 05, 2015   South Africa: in the red

    It was no surprise when South Africa's Minister of Finance, Nhlanhla Nene, announced an increase in personal income tax in the 2015 Budget. But it could have been a lot worse. Many observers had predicted that the Government would increase value-added tax, or even corporate tax, to address a budget deficit that is threatening to become structural. Doubtless the devil will be in the detail. And the phrase "the Government is to take further steps to combat revenue leakages through erosion of the tax base, profit shifting, and illicit money flows" shows that beneath the more eye-catching measures to help small businesses, a series of complex revenue raisers lurk that will keep the midnight oil burning in many a corporate tax department. There's no getting away from the fact, though, that the Government needs revenue and the Budget therefore raises tax rather than cuts it. And this isn't just a one-off event either. South Africa's economy is slowing, and despite a huge increase in the country's tax base over the last 20 years or so, taxes simply can't keep pace with spending. The current administration's ability to manage the economy, as well as its own finances, must be being called into question by some foreign investors. Let's not forget that foreign investment will also have a substantial role to play in poverty reduction and South Africa's future prosperity.
    Source: www.tax-news.com/news/South_African_Budget_Hikes_Personal_Income_Tax____67388.html

  • Oct 30, 2014   South Africa: where's the money gone?

    On a similar note, after Finance Minister Nhlanhla Nene warned recently that additional revenue measures will be required in the 2015 Budget, South Africa's taxpayers must be wondering what the Government has been doing with all the extra money it has coined over the past few years in what must represent the largest and swiftest enlargement of a tax base in modern history. The drive to increase the number of people and businesses (which are essentially the same thing, as Margaret Thatcher pointed out in the 1980s) in South Africa paying tax has been remarkably successful. In 1994, there were only 1.7 million registered taxpayers in South Africa. By 2010, this had swelled to 6 million. Growth in the number of corporate taxpayers has followed a similar trajectory. Meanwhile, the South African Revenue Service maintained a compound annual growth rate in tax collections of 13.2 percent from 1994-95 to 2011-12. It is undeniable that South Africa has some unique problems as attempts to unite the country racially continue 20 years after the abolition of Apartheid, and the State has an important role to play here. But while governments are good at spending, history tells us that they are not the wisest of spenders – natural enough when you are spending other people's money, and not your own. The Government has no plans to cut spending though, and with a 4.1 percent budget deficit having opened up, the books will only be balanced through increased taxation. With economic growth slipping, the signs are beginning to look quite ominous for South Africa.
    Source: www.tax-news.com/news/South_Africa_Warns_Of_Future_Tax_Hikes____66201.html

  • Nov 01, 2012   South Africa: on course for fiscal disaster

    Government spending is completely out of control in South Africa, and only massive increases in taxation have masked the problem. This year the deficit is reckoned to increase from 4.2% to 4.8% despite a 10.6% increase in tax receipts. These are really scary numbers, especially because the government seems to have no idea that it is heading for a crunch collision. The government says it is committed to real increases in spending of 'only' 2.9% per year. Inflation is running at 5.5%, so the government is planning to spend 8.5% more in cash terms every year. The Revenue Service has done a spectacular job of increasing tax receipts through efficiency improvements and the rounding up of more taxpayers, but these are once-off gains which have deluded the government into thinking that the river of gold will flow for ever. In reality, increases in public spending are notoriously sticky and extremely hard to reverse, even if there is willingness and understanding of the need for it, which is blatantly absent in the current administration.
    Source: http://www.lowtax.net/asp/story/front/South_Africa_To_Deal_With_Rising_Deficit____58023.html

  • Aug 30, 2012   South Africa: egged on to tax by the IMF

    South Africa has its own particular blend of problems, mostly due to its awful history, but the government is not helping by enjoying a banquet of scrumptious tax money being generated by more efficient tax collection, along with some nice new taxes. The problem is that public spending is leaping along, fed by the new vein of gold, and the resulting transfer of resources from the private sector to the public sector will act as a damper on business. South Africa in this respect is typical of a type of mid-level developing country where tax-paying, if not optional, is far from the norm. Only a small proportion of businesses are known to the tax authority, which is itself often highly inefficient if not actually corrupt. Other such countries include notably the Philippines, Pakistan and Indonesia. Relatively minor improvements in collection techniques yield a bonanza of new tax money, but governments are typically very bad at using it productively. For the IMF to encourage this type of government to add even more taxes is pernicious.
    Source: http://www.lowtax.net/asp/story/front/South_Africa_Mulling_MediumTerm_Tax_Hikes____57020.html

  • Jul 05, 2012   South Africa: wrings the necks of Brazilian chickens

    Brazil is hardly a beacon of free-trade purity, but it is right to attack the anti-dumping duties South Africa places on its poultry exports, as high as 65% in some cases. Anti-dumping duties are anathema to me; the world would be doing itself a favour if they were banned lock, stock and barrel. They are especially iniquitous in the agricultural sector, where the EU has been a prime offender over the years. If you protect a farmer with subsidies, you increase costs for your own citizens, but worse, you deprive lower cost producers in undeveloped countries, which leads directly to economic disaster and in many cases starvation. Go figure. I don't know the history of South Africa's poultry sector, but without a doubt, it is being protected in order to secure the votes of farmers, just as used to be the case in France, for example. One odd thing about this: how can it be that poultry farmers in Brazil can produce their animals for half of what it costs in South Africa?
    Source: http://www.lowtax.net/asp/story/front/Brazil_Takes_Poultry_AntiDumping_Dispute_To_WTO____56107.html


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