/ 25 October 2013

Pay hikes keep the taxes rolling in

Sars officials and police officers are accused of extortion.
Sars has not met its revenue collection targets for the past two years. (Gallo)

The 2013 tax statistics, released before the medium-term budget policy statement this week, revealed that tax revenue grew by R71.2-billion, or 9.6%, on the previous year, despite much economic uncertainty.

Tax collected for the 2012-2013 fiscal year to March 31 2013, reached R813.8-billion, according to the South African Revenue Service (Sars), marginally up from the revised budget estimate for the gross tax revenue of R810.2-billion announced in the main budget given in February.

Despite collections, the outlook for the second half of the year remains uncertain and tax revenue projections were still expected to come up short for the 2013-2014 financial year.

Company contributions as a share of tax revenue have declined since last year and have not recovered to the levels seen before the financial crisis, according to Sars, but growth in the share of revenue from personal income taxpayers has helped to pick up some of the slack.

Personal income tax (PIT), company income tax (CIT) and value-added tax (VAT) are the three largest sources of revenue for the government.

PIT contributed over R276-billion, or 34%, of revenue, up from 33.4% the previous year. CIT contributions to revenue were 19.8%, or a little over R160-billion, a far cry from the R167-billion in 2008-2009 when it made up 26.7% of tax revenue.

Wage settlements
According to Sars, the extent of the shift is shown by the fact that, although PIT contributed only R28.9-billion more to tax revenue than CIT in 2008-2009, it provided R115.8-billion more than CIT in 2012-2013.

Wage settlements that were above inflation rates last year were key to bolstering the share of revenue from personal income tax, according to Sars executive manager Mamiky Leolo. A "modest recovery" in employ­ment numbers also contributed, she said.

The sector of the economy that generated the most PIT was the financial intermediation, insurance, real estate and business services sector, with 43.5% of all personal income taxpayers coming from it. It also contributed the most to personal income tax assessed, which rose to over R100-billion, or 48.6%, during 2012. But the figure is down from 50.4% the previous year.

The community social and personal services sector, which broadly covers government employees, contributed the second-largest amount to personal income tax — R36.5-billion, or 17.6%, up from R30.2-billion the previous year.

Growth in employment by the government has helped to offset job losses in the private sector in recent months.

"Much of the losses in employment was taken up by government employment so there will be a reflection of that in the … figures," Sars group executive for revenue analysis Randall Corolissen said at the media briefing when the 2013 statistics were announced.

VAT contribution
The growth in PIT closely tracks movements in the national wage bill, according to Sars.

The VAT contribution to revenue also helped to offset some of the declines in taxes on company profits. This indirect tax on consumption grew to 26.4% of total revenue in the year 2012-2013, to R215-billion, up from 25.7% the previous year.

According to Leolo, although there was some, "but not major", growth in domestic VAT, there had been a sharp increase in VAT on imported goods and customs duties.

Thanks to the strong imports of capital equipment and vehicles, and the deteriorating value of the currency, import VAT grew by 9.4% compared with the previous year.

Imports of machinery, mechanical appliances and electrical equipment contributed the most to import VAT — 29%, or R29.7-billion, according to Sars. This was followed by import VAT collected on vehicles, aircraft, vessels and associated transport equipment — 14.5% or R14.9-billion.

Sars said that this growth in imports had not been sufficiently offset by commodity and vehicle exports to Europe and Asia, hence the growing deficit of the country's trade account, which forms part of South Africa's balance of payments.

Companies' poor performance
In line with the poor performance of the country's companies, the royalties from the country's mineral and petroleum resources sector declined by 10.6% between 2011-2012 and 2012-2013, slipping from a total of R5.6-billion to just over R5-billion. Royalties from the platinum sector fell by 46% from R853-million to R461-million, the largest decline seen in a minerals sector.

Royalties from copper, diamonds and industrial minerals fell by 39.2%, 39.7% and 38% respectively.

Only royalties from the coal sector, gold and uranium, manganese and minerals classed as "other" saw growth.

Royalties from coal increased from R297-million to R436-million, those from gold and uranium increased from R817-million to just over R1.1-billion and manganese rose from R149-million to 199-million.

Commodities grouped as "other" include chrome, fluorspar, nickel, oil and gas, phosphates, vanadium and unspecified minerals. This category saw a 97% increase in royalties, going from R183-million to R361-million, although it only makes up a relatively small portion — 7.2% — of the total amount collected.

Although royalties from iron ore fell by 23.2%, it was the largest contributor — R1.92-billion, or 38.3% — to the total royalties collected.