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Average tax costs today compared to a decade ago

Sunday, 23 September 2012   (0 Comments)
Posted by: SAIT Technical
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By Dirk Kotze (Moneywebtax/Mazars)

While there is much fanfare from the South African Revenue Service (Sars) about how easy it is for South Africans to be good taxpayers - thanks to e-filing - it's interesting to note how much being good at paying your tax in 2012 will cost you compared to, say, ten years ago.

In an annual salary survey published early in 2012 it was found that the average income of a South African is R260 820 per annum. Assuming a 6% annual increase in line with inflation, it would mean that, on average, South Africans earned R154 379 per annum in 2003. That is a cumulative increase of 68.95% over the period.

Assuming that these average incomes are also the taxable incomes, the average South African's tax bill for 2012 would amount to R45 241 while for 2003 it would have been R37 222. The average tax rate for the average South African is therefore 17.34% in 2012 while in 2003 it was approximately 23.96%.

From these simple calculations it can be deduced that the average tax rate per person in South Africa has decreased by almost 27.5% since 2003, at the average income level.

With the marginal tax rate at the maximum income level also remaining at 40%, and the tax brackets steadily increasing each year, it would be easy to assume that South Africans are less burdened today than they were a decade ago. It's even much easier to file your tax return as well.

The tax tail should not wag the financial dog, however; other tax related costs should be considered when determining the average tax burden of South Africans in relation to the abovementioned incomes.

In 2003, the average taxes on unleaded petrol totalled R1 per litre, as per the Annual Report of the South African Institute of Professional Accountants (SAIPA). In 2012, this was budgeted at R2.61 per litre. Assuming that South Africans travel the same distances to and from work in 2012 as they did in 2003, that is an increase in fuel costs of 161% without even considering the oil price or US$ exchange rate. There is also the threat of increased toll road charges hanging over the heads of road users, especially in Gauteng.

Due to Eskom's woes, as well as the need to stimulate a green economy, National Treasury also introduced an electricity levy a couple of years ago and while it is currently at 3.5cents per kilowatt hour of electricity it is another tap that has been added to the system and that has opened slightly every year since then.

Not only has this additional charge increased the electricity consumption costs charged to households byMunicipalities, the costs for other services such as rates and taxes, water, sewage and refuse collection have also increased, as has the method of calculation in some instances.

Further, while the VAT rate has remained unchanged at 14% it must be remembered that VAT is a factor of the price of goods. As these prices have increased over the past decade, the VAT amount has steadily increased as well.

Average citizens are increasingly contracting with private security firms due to a perceived lack of safety in South Africa. Similarly, large payments are made to private medical aid funds each year due to the perception that state health care facilities will not provide the necessary care in the case of an emergency or serious medical condition. Surely safety, security and a proper functioning health system should be a given when one's taxes are paid and these extra costs to cover for the underperformance of Government in these aspects can almost be regarded as an additional tax charge.

Add to these real and perceived taxes the large increases in food prices, education and clothing costs to mention but a few it is easy to understand that the average individual in South Africa today must feel like they are getting a lot less bang for their buck that they did some years ago.



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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