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Tax base in South Africa Shrinks

South Africa has been faced with a number of unexpected battles due to the COVID-19 battle that has now seem to have subsided, however with the new data that SARS has released it seems SA is struggling to gain momentum in revenue collection.

Edward Kieswetter, who is the SARS commissioner said on the parliamentary presentation on Tuesday the are a number of factors that are manifesting in the measurably weaker economic activities, especially in the manufacturing and financial sectors in the 2019/2020 financial year.

The factors which were identified by SARS on Tuesday during the presentation were laid out as lower business confidence, Underperforming SOEs; Unreliable electricity supply; High public debt; as well as Poor economic conditions;

BusinessTech also reported that: ‘By Q4 2019, a contraction in real GDP of 0.4%, 2.9%, and 1% was recorded respectively in the primary, secondary and tertiary sectors.’ The worst was seen when in the first quarter of 2020 when the GDP was -18.8%, -7.5%, and 1.3% respectively.

There has been an increase in retrenchments as identified by Kieswetter at SARS, as well as lower-wage settlements, reduced bonus payments, and worsened by the slow growth in consumer spending in 2020.

SARS tax directives for retrenchments by 2019/20 increased by 48 000 (from 239,000 to 287,000). The number reflects the number of PAYE contributors who are most likely not to contribute to the FY2020/21 tax base – this can only be changed when they are re-employed. 

PAYE stands for Pay-as-you-earn and is a type of tax that’s required to be deducted from employee’s remunerations.

 


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