SA’s tax burden among the world’s highest
South Africa is reportedly one of the jurisdictions with the highest tax burden in the world.
“We have company taxes around the top ten tax burdens in the world as a percentage of GDP and personal income tax,” said Mike Schüssler, chief economist at Economists.co.za, speaking on the Safm Market Update with Moneyweb this week.
“And then we also have value-added tax, which is nicely in the middle. So, if you look at that, you are looking at two of our taxes in the top ten countries in the world. As a small economy, that is a very big burden to carry….”
Sars has struggled to collect taxes in line with its targets over a number of years past. Yet its tax-collection targets are rising.
Asked where government can get more taxes from South Africans, Schüssler said it’s probably considering value-added tax (VAT). “Another would be direct taxes like the fuel levy, carbon taxes, the sin taxes…. But that’s not enough. So, they’ll probably have to come back to the personal income tax…despite the fact that some people are losing their jobs.”
He admits SA’s reached a plateau it can’t easily get out of. “We have a huge budget deficit and the minister of finance must think how he is going to handle the whole episode in the medium-term budget policy statement.
“And the rating agencies, particularly Moody’s, are going to be watching that very closely, as are investors. So, this time it’s around the spending; but if we are going to be spending and not bring it down, we are going to see more tax hikes.” Asked if he thought people are planning to either leave SA or avoid higher personal income tax, he said both are happening. “The fact that Sars are trying to get foreign earnings from people that work out of the country more than 183 days a year, says they are under pressure, and a lot of those people will have choices to leave.
“You’ll find a lot more people have tried to circumvent taxes…. And in terms of VAT decreasing, consumers are trying to buy smaller items and Vat-free items.”