Tax data for 2022/2023 not as good as it seems – economists

Economists are urging the public to look past the seemingly good tax data that shows that Sars collected R2.07 trillion in gross tax revenue in the 2022/2023 fiscal year and see the bigger picture of the danger of the tax base collapsing as the people who pay the biggest part start to emigrate to countries where there is less crime and where they pay less tax.

National Treasury and the South African Revenue Service (Sars) jointly published the 16th annual edition of the Tax Statistics on Friday that gives an overview of tax revenue collection and tax return information for the tax years 2019 to 2023, as well as for the 2018/2019 to 2022/2023 fiscal years.

According to the data, Sars collected R2.07 trillion in gross tax revenue (R183 billion or 9.7% more than the year before), refunded taxes worth R381 billion (R60 billion or 18.7% more than the year before) and netted tax revenue amounting to R1.69 trillion (R123 billion or 7.8% more than the preceding year).

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‘Be aware what data shows’ – economist

However, Prof Bonke Dumisa, an independent economic analyst, says people must not just look at the data, but be aware of what it shows.

“Personal tax dominates tax collection. In preceding years, personal income tax accounted for 40% of tax revenue, but the latest data puts that figure at 35.7%, which shows that many people have lost their jobs.

“What it also shows is that it is no longer a rumour that high-income earners are emigrating. Although we have about 24 million tax payers, only about 8% of them actually pay personal income tax. This is less than 8 million people who make up 40% of the tax base in the country.”

The other tax payers all fell under the threshold of earning R91 000 per year, which will now this year increase to R95 000 per year.

Dumisa says where mostly white South Africans emigrated previously citing the crime in the country as the main reason, black South Africans are now also emigrating.

“These high-income earners say they only work for Sars because they pay so much tax and get very little back for what they pay. They emigrate and go to live in countries where there is a lower tax rate, better security and better schools and medical services.”

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No good news for corporate tax base either

He also does not see good news in the realm of corporate tax and points out that although the statistics for Company Income Tax (CIT) shows 1 057 040 companies were assessed by 30 September 2023 for the 2021 tax year, only 20.7% declared a positive taxable income, while 52.6% had taxable income equal to zero and the remaining 26.7% reported an assessed loss.

“This tells us that the company tax base is no longer delivering. It will not help to increase company tax as many companies are already not paying tax.”

Dumisa says South Africa’s tax base is diminishing on all fronts.

“We must look at the statistics and not see the glorious picture government is trying to paint as the data does not tell the full story.”

Jannie Rossouw, a visiting professor at the Wits Business School, agrees that the South African tax base is under pressure.

“Fewer people are paying more tax and this cannot continue. High-income earners will emigrate and there will be nobody left to pay tax.”

He also points out that although economic growth is weak, government wants increasingly more from tax payers.

According to the tax statistics published, there was a broad recovery in tax bases and higher-than-average commodity prices supported the growth in tax revenues although several risks affected tax revenue collections for the 2022/23 fiscal year, including the prolonged effects of global geo-political tensions, energy supply risks, constrained logistics networks, labour and social unrest, as well as weaker global and domestic economic growth and heightened inflation risks.

Compliance revenue from focused activities and efforts by Sars yielded R231.8 billion for the 2022/2023 fiscal year, R16 billion or 7.5% more than in the preceding year. The total value of trade facilitated by Sars for the 2022/2023 fiscal year was R3.9 trillion, R0.6 billion or 18.4% more than the previous year.

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Key figures in tax statistics

Other key figures in the 2023 tax statistics are:

• Total tax revenue collected by Sars increased from R1 287.7 billion in 2018/19 to R1 686.7 billion in 2022/23, growing at a compounded annual growth rate of 7.0% over this period which is lower than the rate of 7.4% attained for the period between 2013/14 and 2018/19.
• Personal Income Tax remain the largest source of tax revenue at 35.7%, with Value-added Tax (VAT) at 25.0% and Corporate Income Tax (CIT) at 20.6%. These revenue sources comprised 81.3% of total tax revenue collected. The fuel levy, together with specific excise and customs duties, accounted for 12.4%, while other taxes made up the remaining share of 6.2%.
• The tax-to-GDP ratio increased from 23.7% in 2018/19 to 25.1% in 2022/23, the highest ratio attained since 1994/95. Post-Covid-19 economic recovery underpinned tax revenue growth, resulting in a buoyancy ratio of 2.0 in 2021/22, which moderated to 1.2 for the 2022/23 fiscal year.
• By 31 March 2022, the personal income tax register had grown annually by 4.1% to 24.8 million individuals and by a further 4.5% to 25.9 million at the end of March 2023. The number of individuals expected to submit income tax returns was 7.1 million for the 2019 tax year, but this decreased to 6.8 million for the 2021 tax year and then increased again to 7.1 million for the 2022 tax year due to changes in the minimum tax threshold for submission of returns.
• Of the 7 068 925 taxpayers expected to submit returns for the 2022 tax year, 5 989 787 (84.7%) taxpayers were assessed.
• Personal income tax, geographic, demographic and other analyses of the assessments of the taxpayers who were assessed by the end of August 2023 for the 2022 tax year showed that:
  • 2 319 473 (38.7%) were registered in Gauteng
  • 775 508 (36.3%) lived in the Johannesburg Metro and were taxed on an average taxable income of R472 982
  • 1 533 415 (25.6%) were between the ages of 35 and 44
  • 3 070 111 (51.3%) were male and 2 884 706 (48.2%) were female
  • Assessed taxpayers reported aggregated taxable income of R2.1 trillion and tax liability of R447.6 billion, with the average tax rate 21.8% compared to 21.3% in the previous tax year
  • Income from salaries, wages, pension, overtime and annuities accounted for 75.5% of total taxable income.

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Company income tax – only 432 had taxable income of more than R200 million

The tax statistics also show that of the companies assessed, 432 large companies (0.2% of the companies with positive taxable income) had taxable income of more than R200 million and were liable for 67.1% of the company income tax assessed.

The Financial intermediation, insurance, real-estate and business services sector accounted for 253 241 (24.0%) of the assessed companies and was liable for 30.8% of the company income tax assessed, contributing the most among all the sectors.