By Linda Ensor (Business Day)
Executive summary (SAIT Technical)
The 2012 Tax Statistics show that only one third of assessed companies in 2010 were making profits. In addition, only 0.1% of assessed companies that generated taxable income greater than R100m were responsible for 57.6% of the corporate tax in 2010. Furthermore, the statistics showed that SARS's collections had outperformed the economy since 1994-95 and that 67 of every 100 individuals received a tax refund in the 2011-12 tax year.
ONLY 0.1% of companies assessed by the South African Revenue Service (SARS) that generated taxable income greater than R100m were responsible for 57,6% of corporate income tax in 2010, demonstrating the high level of concentration in the economy, the latest edition of Tax Statistics 2012 shows.
Randall Carolissen, group executive of tax analysis at SARS, said at a media briefing on Monday to launch the 2012 edition that a sector breakdown showed only one-third of assessed companies in 2010 were making profits.
He also noted that the corporate sector was lagging individual taxpayers in recovering from the recession, but warned that data on corporate taxation lagged other sectors because of late returns. Also, the business register of companies was not accurate and had to be cleaned up.
Nevertheless, Tax Statistics showed that South African tax collections remained comparatively resilient during the global recession. For instance, in 2008-09, revenue collections continued to grow by 9,1% "buoyed by the lag effect of corporate income tax”.
"In 2009-10, the combined effect of flat consumption and trade taxes and the reduced company profits that came through in the tax collections led to a contraction of 4.2%,” Mr Carolissen said. "Subsequent to this contraction, tax revenue recovered strongly, except for corporate income tax, which remains below pre-crisis levels.”
The statistics showed that SARS’s tax collections had outperformed the economy since 1994-95, and that 67 out of every 100 assessed individuals received a tax refund in the 2011-12 tax year.
Mr Carolissen said the statistics showed the effects of the country’s progressive tax system, which ensured that lower-income earners paid less tax than high earners.
In 2011, the top 9.7% of assessed taxpayers earned 37% of taxable income but were liable for 57% of personal income tax, whereas 42.4% of assessed taxpayers earning less than R120,000 only contributed 3.3% of the assessed tax.
The data showed that the cost of collecting tax was about 1.1%, which Mr Carolissen said compared favourable with other tax authorities around the world.
Compliance by taxpayers had increased strongly since 1994, with the individual tax register growing from 1.7-million taxpayers in that year to 6-million in 2009-10. The register more than doubled to 13.7-million following a policy change in 2011 to register all individuals in formal employment.
Over the same period, the number of companies registered for income tax increased from 422,000 to more than 2-million in 2011-12; registered VAT vendors increased from 397,000 to 652,000 at present; and the number of registered employers grew from 177,000 to 385,000 to date.
Mr Carolissen said the ease of submission of tax returns — for example, via e-filing — had improved compliance.
However, companies’ compliance was not as good as those of indiviudals, and assessments of companies liable to submit returns were significantly lower than those of individuals, at 85.6% for 2008, 81.3% for 2009, 68.5% for 2010 and 51.5% for 2011.
Mr Carolissen said this was partly due to the 12 months allowed for companies to submit returns after their financial year-end. "However, a greater part is due to the inadequacy of the registration information we have for companies, many of which are listed as active but in reality are either dormant or non-existent.”
SARS has also achieved faster turnaround times in assessing tax returns. It paid R12.7bn in tax refunds in 2011 — and 85.4% of these within 72 hours of the return being submitted, compared with 74.3% in 2010.
SARS has paid R60.5bn in tax relief from 2005-06 to 2011-12, with lower- to middle-income earners the major beneficiaries.
Matthew Lester, professor at Rhodes Business School, said the data released by SARS were "incredibly important to all South Africans and an invaluable resource”.
South Africa, he said, had come a long way from the era when "money disappeared into revenue, the details of which we did not know at all”.