SA drops in ease of tax rankings
South Africa has dropped one spot to 20 out of 189 economies in the Paying Taxes study conducted by the World Bank and PwC.
|||Johannesburg - South Africa has dropped one spot to 20 out of 189 economies in the Paying Taxes study conducted by the World Bank and PwC to rank countries in terms of how easy it is for medium-sized companies to pay their taxes.
The study measures the time it takes to prepare, file and pay taxes, the number of taxes that have to be paid, and the total tax rate of the economies included in the study.
PwC head of tax policy Kyle Mandy last year warned South Africa would fall back if there were no further tax reforms.
Significant reforms which previously assisted South Africa to improve its rankings included electronic tax filing and reducing the corporate tax rate.
However, the study, released on Wednesday morning in Johannesburg, indicates the country's high rate of profit taxes (21.7 percent) is well above the global and Africa averages of 16.2 percent and 17.7 percent respectively. South Africa ranks 135th in in terms of its rate of profit taxes.
South Africa also does not rank favourably overall with other African countries. Mauritius takes the lead in Africa in the 13th spot out of the 189 countries.
The country's total tax rate of 28.8 percent ranks behind many of its neighbours such as Zambia (18.6 percent), Namibia (21.3 percent), Mauritius (22.4 percent) and Botswana (25.1 percent).
Mandy warns there is a risk that SA's total tax rate may increase in future "as pressure mounts to introduce new taxes on business to fund increasing spending pressures".
He adds that the focus on reforms globally has moved away from reducing tax rates for companies, to the use of technology and ways to relieve medium sized companies' compliance burden.
"South Africa is a leader [in Africa] when it comes to the number of tax payments [7] due to the widespread use of electronic payments. This is the primary reason for South Africa's very good overall ranking at number 13 in this sub-indicator," says Mandy.
Keith Engel, deputy CEO of the SA Institute of Tax Professionals (SAIT), says despite the slight drop to 20th spot, it is important to note that South Africa remains a top performer internationally in terms of certain aspects of the tax system.
"We sometimes overstate our weaknesses and view the situation worse than it really is. In terms of individuals, our electronic system is better than most countries - even our first world competitors."
Engel says, at a business level, compliance costs and disputes seem to be on the increase. "However, we will probably find that this increase is consistent with global trends in a world where efforts to prevent base erosion and profit shifting have increased exponentially. This issue - the biggest concern for companies - does not seem to be highlighted in the report upon an initial review," Engel adds.
Mandy says it is encouraging that economies worldwide continue to introduce substantial improvements in their tax environment. It means both an easing of the burden on business, and sustainable revenues for governments.
There is still considerable scope for reform of tax systems in terms of simplification and supporting compliance.
Mandy says in a statement its report demonstrates the acute challenge in developing countries of the availability of information technology infrastructure including broadband, needed to design and run a modern tax system to raise the revenues to sustain growth.
IOL