SOUTH Africa may have maintained its ranking in the annual global Paying Taxes study that looks at tax systems from a business perspective, but several countries have increased their tax reforms and overtaken it on the list.
Charles de Wet, a tax director at PwC, said many of the reforms undertaken by the Treasury and the South African Revenue Service since the study started, such as electronic submissions of tax returns, were still being "bedded down".
However, if the country did not continuously reform its tax system, there was a danger that it could start falling behind in the global rankings. This could impact on investments as other more aggressive reformers could become more attractive destinations, Mr de Wet said.
He launched PwC’s Paying Taxes 2013 study in Johannesburg and gave a comparison between South Africa, global economies and African countries.
The study was done between June 2011 and June 2012. During that time 31 reforms were recorded globally and 12 economies reduced the profit tax rate, but 11 countries introduced new taxes, including El Salvador, Malawi, Maldives, Nigeria and Japan.
The report showed South Africa still compared quite favourably with international and African trends. The global total tax rate was 44.7%, Africa 57.4% and South Africa 33.3%. The total tax rate included corporate income tax, labour taxes and other taxes such as VAT.
The study used a company as a case study to measure the taxes and contributions it paid, and the complexity of a particular country’s tax compliance system.
The study looked at the cost of the taxes that were paid by the company in each country, as well as the administrative burden of the taxes. These were then measured using three subindicators, namely total tax rate (the cost of all the taxes paid); the time needed to comply with the major taxes, such as corporate income tax; and the number of tax payments.
Countries whose total tax rate was less than that of South Africa included Zambia, Namibia, Botswana, Rwanda and Ethiopia. Nigeria, Eritrea and Benin were some of the countries with the highest total tax rate on the continent.
South Africa was ranked 32 out of 179 economies that were measured in the study in terms of paying taxes, moving up from the 36th position in the previous year.
In terms of the total tax rate, we were ranked 59th out of all the economies, which is one move down. The country compared favourably, in terms of the number of payments, with the rest of Africa with a weighted average of nine payments, compared to the 37 payments in the rest of Africa.
Mr de Wet said the report aimed to encourage governments to increase their tax reforms, which would affect the ease of doing business.
He said while the time to comply and the number of payments had continued to decline from 2011, the rate of decline for the total tax rate had slowed, mainly due to the global economic slowdown.
Globally it took the case study company 267 hours to be compliant with all the major taxes; it made more than 27 payments; and it had a total tax rate of 44,7%.
The case study company in Africa had a total tax rate of 57,4%; it took the company 313 hours to be tax compliant; and it made 37 payments.
In South Africa, it took the same company 200 hours to be complaint and it made nine payments.