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Blog: 10 March 2017 (South Africas Tax Statistics)
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In today's blog we take a detailed look at South Africa's tax statistics. Looking at a wide variety of numbers from Personal Income Tax (PIT) to Company Income Tax (CIT) to Value Added Tax (VAT) and a few of the more obscure taxes levied against South African citizens.
Tax revenue collected by SARS on behalf of the South African government amounted to R1.07trillion (thats a thousand billion). And this is up by R83.7billion compared to the 2014/2015 tax revenue collected by SARS. |
So where does South Africas government funds come from?
In the first graphic we will take a look at is the contribution of the various tax types to South Africa's total tax revenue collected (for both the 2015/2016 financial year as well as the 2011/2012 financial year). From there we will dig into more detail for the various tax types.
2011/2012 financial year
2015/2016 financial year
From the two graphics above it is clear that tax revenue collected by the South African government via the various channels is very stable over time. One does not see significant shifts in contributions of the various tax types over time. But worrying to see is the increased contribution to total tax revenue by VAT. VAT in its nature is a regressive tax (i.e it affects the poor more than the rich as VAT is fixed tax rate applied to products and the VAT rate does not go up as the value of the item goes). But all in all a pretty stable stream of tax revenue sources for the South African government.
Personal Income Tax (PIT)
The stacked chart below shows the percentage tax payers in each range on the left bar while the percentage contribution to total PIT per range is shown in the right bar.
As can be seen from the chart above that a large number of tax payers (65% of them falls) within the R70 000 to R350 000 taxable income per year (see green block on the left bar), while they only contribute 23.27% of the total tax revenue collected by SARS (see green block on the right bar). While only around 11.8% of tax payers fall in the bracket with a taxable income of more than R500 000 a year (see purple block on the left bar). Yet they contribute 62.05% to assessed tax revenues collected (see purple block on the right bar). What is worrying is that a small group of people is paying the majority of taxes.
And with little to none of their tax money being used to benefit them (but rather divereted to the poorest of the poor via grants), one has to wonder how long such a tax distribution will be viable? At some point tax payers will start revolting against the state due to inefficient use of their tax money.
And with little to none of their tax money being used to benefit them (but rather divereted to the poorest of the poor via grants), one has to wonder how long such a tax distribution will be viable? At some point tax payers will start revolting against the state due to inefficient use of their tax money.
Company Income Tax (CIT)
Often neglected in favour of statistics relating to personal income taxes. But today we will take a more detailed look at CIT. Especially at the type and size of companies paying CIT.
From the stacked bar chart it is clear that a very very small portion of tax paying companies are paying a substantial amount of company income taxes. With 0.12% of companies paying a whopping 47.6% of taxes that were assessed. And we tought personal income tax was skewed. This makes personal income tax skewness and inequality look like a walk in the park.
Looking at the other end of the spetrum, 42% of tax paying companies only paid 0.3% of all assessed taxes. The graphic below shows the percentage of tax paying companies per tax bracket as well as the contribution of each grouping to total assessed taxes.
Looking at the other end of the spetrum, 42% of tax paying companies only paid 0.3% of all assessed taxes. The graphic below shows the percentage of tax paying companies per tax bracket as well as the contribution of each grouping to total assessed taxes.
Customs Duties
The pie chart below will take a look at the main sources of customs duties for SARS. It groups all imported items according to Harmonised System (HS) classification. And then the sum of duties per group is calculated.
Ever wondered by cars are so expensive when compared to the rest of the world? Well this will answer it for you. Tax authorities levied a whopping R13.1billion on the imports of vehicles, aircrafts and vessels. Since we not exactly buyers of aircrafts and vessels we can assume the majority of that R13.billion is levied against companies importing motor vehicles.
Textiles and clothing had R9.2billion levied against it. To little to late though as the clothing and textiles industry in SA is dead due to cheap imports from Asia over the years. So what are the duties paid per trade region? We take a look below.
Textiles and clothing had R9.2billion levied against it. To little to late though as the clothing and textiles industry in SA is dead due to cheap imports from Asia over the years. So what are the duties paid per trade region? We take a look below.
Customs duties per region
From the pie chart one can see that the biggest chunk of SA's customs duties are earned from Asia. with almost 60% of customs duties earned by South Africa coming from Asia. With Europe in second place with 29.6% and the Americas a distant third with 9.9%. Now breaking this down even further we find the following countries contributing to the total amount of customs duties levied for the 2015/2016 financial year.
Customs duties per country
Its clear that China pays the most in import duties. Small price to pay for the amount of goods they are importing. China's effective import duties worked out to 7.89% of total goods imported. Second highest excise duty rate just behind Switzerland at 8.53%. The country with the lowest effective import duties rate was Netherlands with a rate of 0.73%
Value-Added Tax
Perhaps the most controversial of the taxes. Value added tax as we mentioned earlier is regressive in its nature, as it 14% of the value of the item being bought. It therefore affects the poor to bigger extent than what it affects the rich. And this is one of the reasons we have not seen the rate of VAT increase over the years, while PIT, Customs, Excise, Fuel levies, Dividend taxes etc all went up in recent years. Government is scared of the public's response to an increase in VAT. Widespread protests can be expected should the VAT rate ever be increased. But if government makes more "staples" bought by the poor VAT exempt it could counteract the expected negative reaction from the poor. As with the breakdown of PIT and CIT below we take a look at the percentage of VAT payers per group, and the percentage of VAT paid by each group.
As is the case with PIT and CIT, a very small number of VAT payers pay the majority of VAT. This skewed nature of South Africa's tax system is not sustainable. A more even distribution of taxes amongst tax paying entities should be the ultimate aim, as the current one is unsustainable, as eventually the tax paying minority will look to move money elsewhere where their tax burden is less, or their tax money is used on them and not just redistributed to millions of unemployed.
Other taxes
The pie chart below taxes a more detailed look at taxes that are grouped into "other" in the first pie chart regarding where tax revenue comes from. We included 5 of the more significant taxes under "Other". They are Environmental Taxes (Carbon emissions tax, plastic bag levy etc.), Estate Tax, Donations Tax, Transfer duties and Security Transfer Tax. The pie chart below shows the relative contribution as well as the value each tax makes up of the roughly R26billion in taxes they bring in.
Look at the "other" taxes one gets the sense that they are directed at the rich, as they refer to carbon emissions (for car buyers), to security transfers tax (shares on the JSE) to transfer duties on properties (over R750k).
One has to wonder with the continued heavy taxation of the wealthier South Africans, how long this will last before they seek alternative places to earn save and invest their money? The Treasury has a tight rope to walk, we all know that, but pushing the rich to far in terms of their tax burden will have significant long term negative effects on South Africa. As soon as the super rich runs off somewhere else, the state will look to tax the middle class more and more, until they decide to look for other pastures too.
A greater "pool" of tax payers and leving small amounts on the lower middle income earners will be a starting point, and looking to raise VAT will making more items bought regularly by the poor VAT exempt will be a step in the right direction. As the continued dependence on the small number of tax payers that pays the most of our taxes, or the small number of companies paying the majority of VAT and Company Income taxes will not be sustainable over the long run. Time to share the tax burden a bit more evenly Mr Gordhan.
One has to wonder with the continued heavy taxation of the wealthier South Africans, how long this will last before they seek alternative places to earn save and invest their money? The Treasury has a tight rope to walk, we all know that, but pushing the rich to far in terms of their tax burden will have significant long term negative effects on South Africa. As soon as the super rich runs off somewhere else, the state will look to tax the middle class more and more, until they decide to look for other pastures too.
A greater "pool" of tax payers and leving small amounts on the lower middle income earners will be a starting point, and looking to raise VAT will making more items bought regularly by the poor VAT exempt will be a step in the right direction. As the continued dependence on the small number of tax payers that pays the most of our taxes, or the small number of companies paying the majority of VAT and Company Income taxes will not be sustainable over the long run. Time to share the tax burden a bit more evenly Mr Gordhan.