Corporate income tax hike ‘unlikely’

It’s very unlikely that government will increase the corporate income tax rate as it looks to implement an estimated R30 billion of tax hikes next year.

Kyle Mandy at PwC South Africa says corporate income tax isn’t something National Treasury regards as a priority tax for raising revenues, as it’s the most economically damaging of all the taxes.

“In a low growth environment, to increase corporate income taxes is going to do more harm.”

SA’s corporate income tax rate of 28% is relatively high versus the global average of roughly 25%. Internationally, the current trend is to reduce company taxes, he adds. “In that sense it is difficult to see Treasury even suggesting that corporate income taxes should be increased.”

According to The World Bank and PwC’s Paying Taxes 2018 report, which examines the ease of paying taxes in 189 countries, SA compares relatively well to other countries with an overall 46th position in the rankings.

While SA’s total tax and contribution rate of 28.9% compares favourably with global (40.5%) and regional averages, the country has a relatively high rate of profit tax, well above the global (16.3%) and African averages (18.3%).

Mandy says SA taxpayers also tend to be pretty thorough in preparing tax returns and schedules and ensuring they claim deductions where appropriate.

While the study suggests that SA performs relatively poorly with regard to VAT refunds with an average time of 26.6 weeks, PwC’s internal data for similar companies show that the average VAT refund is paid within 12.3 weeks. Although three months is still quite long, it’s a lot shorter than the survey result.

Mandy says this is a perception issue and Sars has some work to do to change the perception that it effectively takes six months to get a VAT refund on average.

The Tax Ombud’s recent report, which found that Sars unduly delayed refunds sometimes, will improving the situation.

SA taxpayers tend to be thorough in preparing tax returns and schedules and ensuring they claim deductions where appropriate.