Efficiency improves, but young and old vulnerable.
JOHANNESBURG – Almost 95% of income tax returns were processed within three seconds of submission in the 2013/2014 fiscal year.
The South African Revenue Service (Sars) has come a long way since 2007 when only 2.6% of returns were processed within 48 hours of submission. The improvement in the turnaround times of assessments comes largely on the back of the modernisation of its processes, notably eFiling.
Each year Sars and the National Treasury release a joint publication called Tax Statistics. The booklet aims to inform the public and other interested parties of revenue collection figures, offers insight into economic indicators and is also an effort to assist policy makers.
While the publication itself and the data spread across its 200-plus pages can be somewhat overwhelming, a number of interesting trends emerge:
1. SA’s tax base still small, but broadening
While the number of people who pay personal income tax is still relatively small, the tax statistics do show a base broadening over time. Whether this growth will be enough to sustainably support political and socio-economic development targets remains to be seen.
Deon Breytenbach, Sars executive for revenue planning, says in 2004 roughly 2.9 million taxpayers were liable for tax. This number grew to 4.5 million in 2013, an increase of 53.9%.
In addition, in 2013 a further 2.2 million individuals paid PAYE (Pay As You Earn) but did not submit any tax returns as the majority of these taxpayers were below the R250 000 income submission threshold, he says.
The broadening is also evident in the number of assessed taxpayers (irrespective of whether they were liable for tax or not), which have grown from 3.5 million in 2004 to 5.2 million in 2013, an increase of 46.1%.
Breytenbach says that this is considerably higher than the 9.7% increase in the population register.
2. Average increase in taxable income higher than inflation
The 2014 Tax Statistics also tracked the financial health of taxpayers over a ten-year period.
Breytenbach says 3.5 million taxpayers were assessed in 2004.
Roughly 1.7 million of these taxpayers were 54 and younger at the time and were assessed during all ten subsequent tax years. (Quite a number of the remaining 1.8 million taxpayers earn less than R250 000 a year and are not required to submit a tax return anymore, while some have passed away.)
Many of these taxpayers (around 760 000) were in the R60 000 to R120 000 bracket during 2004 with an average taxable income of about
R89 000. Their average taxable income increased to around R265 000 by 2013, Breytenbach says.
“That gives you an annual average increase of 11.7% over the period.”
Breytenbach says there were about 311 000 taxpayers in the 30 to 34 year age bracket in 2004 with an average taxable income of about R120 000. Their taxable income increased at an average rate of 13.8% over the period to 2013, while their effective tax rate spiked from 20.5% to 23.8%.
If a taxpayer can be employed for a consecutive ten-year period, the chances of outperforming the market are very good, he says.
3. Young and old vulnerable
Dr Randall Carolissen, head of revenue analysis and tax planning at Sars, says the tax statistics reveal “extreme volatility” in employment in the age group 18 to 35.
More than a third of those employed in this cohort have intermittent jobs throughout any given year.
But it is not only young taxpayers who are vulnerable.
Carolissen says an analysis of jobs trends among pensioners in the age group 65 and older shows that about half a million people in this grouping, mostly professionals in high income categories, are still employed or have returned from retirement.
“So it could be a question of pensioners having to return to the job market to perhaps support their unemployed children,” he notes.
4. Cost of revenue collection lower, ‘but where’s the service?’
The cost-to-tax-revenue ratio (the cost of revenue collection) dropped slightly from 1.07% in 2012/13 to 0.97% in 2013/14. The international benchmark is 1%.
Stiaan Klue, chief executive of the South African Institute of Tax Professionsals (Sait), says this is laudable and speaks to the modernisation of Sars’ processes.
However, instead of focusing on containing costs, he believes the revenue authority should rather focus on improving service delivery, especially to small businesses. Small businesses make a significant contribution to the country’s gross domestic product and are at the centre of government’s job creation initiatives, yet Sars’ efforts are still largely aimed at improving service delivery to large corporates, for example by operating a large business centre, he says.
“Where is the small business centre?” he asks.
Klue calls on Sars Commissioner, Thomas Moyane, to establish a small businesses centre with dedicated service leaders to assist entrepreneurs.