Edward Van Zyl
SOUTH Africa is ranked 19 out of 189 economies in the 2015 Paying Taxes study conducted by the World Bank and PwC in terms of how easy it is for a medium-sized case study company to pay its taxes.
The study is the only research that measures the ease of paying taxes by assessing 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 company.
PwC tax technical partner Kyle Mandy said at a presentation in Johannesburg on Thursday that the study gave specific context to what could be possible in terms of policy and tax changes as proposed by Finance Minister Nhlanhla Nene in his October mini-budget.
Mr Mandy said on the face of it SA was still performing well, but in the absence of further reforms the country’s ranking would fall.
SA has two areas where it could still improve. This includes the total tax rate, which is currently at 29%. The total tax rate is made up of profit taxes (22% of the total tax rate comes from profit taxes), labour taxes and other taxes.
"If SA engaged in tax positive reforms by shifting the burden from corporate income tax to indirect taxes that would improve our total tax rate significantly. There is scope to introduce reforms if we are prepared to take those bold decisions to make our tax system more conducive to economic growth," Mr Mandy said.
"We will have to wait and see what will happen in February when Mr Nene presents his budget."
Mr Nene announced in October that SA needed to raise R44bn in taxes over the next three years.
According to the study, the total tax rate globally is almost 41%. It takes the average medium-sized company 264 hours to comply with its taxes compared to 200 hours it takes a similar company in SA.
The study showed that a South African company only has seven tax payments, compared to the average of almost 26 payments.
SA has the 40th-lowest total tax rate out of the 189 economies included in the study. The figures were based on the position of a company in the 2013 calendar year.
"A cause for concern is SA’s relatively high rate of profit taxes of 22% which is well above the global average of 16% and 18% in the region," Mr Mandy said.
"The question from a policy point of view is whether SA really has the scope to increase corporate tax rates. The answer is fairly obvious, if anything there should be a reduction in corporate taxes."
The Paying Taxes study showed that Central Asia and Eastern Europe were still the fastest reforming regions with large decreases in all three indicators measured in the study.
The Middle East had the least demanding tax system with the lowest total tax rate (24%) and time to comply (160 hours). However, electronic filing was still considered "a challenge" and the total number of payments the case study company had to make is almost 17