The South African Revenue Service (SARS) has published its preliminary income result for 2020/2021, indicating that it has managed to exceed revised budgets for tax collection.
However, further analysis of the data shows that this good news is likely due more to luck than good policy interventions, says Busi Mavuso, Managing Director of Business Leadership South Africa.
Mavuso said the R25 trillion collection figure for the year is still R106 billion lower than the R3.5 trillion raised last year (-7.8%) and 175.4 billion rand less than the 4.2 trillion rand that had been budgeted for the year in February 2020 (-12.3%).
The good news is that this was a much better result than the 300 billion rand revenue collapse that was expected at the time of the emergency budget last year, she said.
The positive surprises were driven by higher interim tax payments and royalty recoveries from mining companies due to a weaker rand and high prices for iron ore, platinum group metals and gold. gold.
The provisional mining income tax was 57% higher than the previous year. But the much larger financial sector saw a 15.3% cut in income tax payments as profits plummeted. Manufacturing also fell 16%, and community social and personal services fell 28.7%.
“So the mining sector saved us from a much worse outcome,” Mavuso said, noting that South Africa would be in a much better position if it had the proper policies in place to take advantage of the mining sector and other industries. .
“Imagine if the 5,000 mineral rights applications awaiting approval from the Department of Mineral Resources and Energy were processed on time.
“Imagine if the long-standing revisions to mining legislation and the mining charter had been finalized. The mining sector would have been much larger than it is and the collections therefore even more important.
Looking forward to
Looking at specific government interventions, Mavuso said there was evidence of major blows to tax collection.
“Excise duties have been severely curtailed by alcohol and tobacco bans, with R14.6 billion (-31%) less in collection compared to a year ago.
“The largest decrease (-46%) was recorded for cigarettes, although several studies have shown that cigarette consumption did not drop much during the ban, with smokers simply moving to supply chains from the illicit economy. “
“The numbers prove what I have said often: we need to make business in South Africa better.”
To achieve this, Mavuso said businesses need an enabling environment – cutting red tape and making it easier to operate.
If businesses find it faster and easier to navigate government bureaucracy, they can become more responsive to opportunities, invest and grow the economy, thereby increasing the taxes they pay as a result, has t she declared.
The to-do list is long but starts with relatively easy interventions, she said. These are:
- Facilitate the production of electricity by businesses and resolve the chronic energy insecurity that currently hinders operations. “Let them create plants up to 50 MW without a license.”
- Make it easier to hire qualified foreigners to replace those who have been lost to brain drain. “The reality is that many companies can’t find the people they need to tap into the expanded capacity they could create, so they don’t invest.”
- Conduct spectrum auctions so that network providers can invest in expanding capacity and increasing the availability of broadband in the economy.
Mavuso said the country should also step up its investment in infrastructure, noting that it invests much less in expanding the capacity of the economy through infrastructure than high-growth countries.
The key is to make it easier for the private sector to provide the skills and finance needed to boost investment in public infrastructure through the right regulatory changes, she said.
“It can be done at no additional cost to the government – in fact, it can even free up budgets for larger spending on utilities. If we deliver these structural reforms, which the president has already pledged to do, the SARS numbers would be even more impressive.
“It’s time we used politics to stimulate more economic activity and generate the revenue the government needs.”
Read: This is who pays South Africa’s taxes