|SA 'too reliant on personal taxes'|
09 June 2014
SOUTH Africa is overly reliant on only two taxes in the total tax mix and as the current tax system is already "at full stretch" any further demands would distort economic activity and taxpayer behaviour.
This warning was sounded by Chris Evans, professor at the school of taxation and business law at the Australian school of business.
Speaking on Monday at the annual Tax Indaba organised by the South African Institute for Tax Professionals, Prof Evans said the scope for extracting more from tax in the South African system had been "fully utilised".
South Africa had a very narrow tax base with few taxpayers carrying the biggest burden.
Prof Evans, also an extraordinary professor at the University of Pretoria, said the South African economy was heavily reliant on two taxes — personal and Value Added Tax (VAT) — far more than the reliance placed on the tax system in members of the Organisation for Economic Co-operation and Development (OECD).
In South Africa, personal income tax represented 34% of total tax revenue compared with 24% for OECD members. Corporate income tax made up 23% of the total tax revenue in South Africa and only 9% in the OECD, and 27% from VAT in South Africa and 20% in the OECD.
"You cannot squeeze more blood from this stone," said Prof Evans.
Among the more worrying scenarios sketched by business author and scenario planner Clem Sunter was one where South Africa slipped towards the status of a failed state.
He said the spectre of violence had taken root in South Africa, giving the country a 25% probability of becoming a failed state was "simply too violent and unpredictable".
Mr Sunter said the failed state scenario had been given a zero-probability for many years, but the Marikana killings was a serious red flag. "It has led to the transformation of relations in labour as we see in the platinum sector at the moment," he said.
Mr Sunter also said those countries that found themselves in the "premier league" had inclusive leadership like the one South Africa had had under former president Nelson Mandela. The critical flag to watch out for was whether the newly elected government would divide or unite the country.
"As a divided team we will certainly drop into the second league," he said.
He said South Africa still had a number of "pockets of excellence", of which the South African Revenue Service was one, but warned that the country was losing even such success stories. The country also needed a balanced economy and had to change its attitude towards entrepreneurs.
An investor remarked that other countries rolled out the red carpet for investors, whereas in South Africa red tape stood in the way of this.