Statistics South Africa has published a breakdown of South Africa’s ‘tax pie’ and who contributes to it.

The data shows that personal income tax has become more important as a source of government revenue in recent years, contributing over a third of the R1.22 trillion in taxes collected by national government in the 2017/18 fiscal year.

The second biggest source of tax was value added tax (VAT), followed by company income tax.

“The tax mix looked starkly different a decade ago. In 2008/09, national government collected about the same amount of personal income and company income tax: contributions that year were 31% and 30% respectively,” Stats SA said.

“The 2008–2009 global financial crisis, which resulted in South Africa’s first economic recession since 1994, was particularly hard on businesses. Revenue from company income tax declined in 2009/10, and since then has grown at a much slower rate than the amount collected from personal income tax.”

Tax to GDP

South Africa finds itself in the list of top 10 countries with the highest tax-to-GDP ratio, according to the International Monetary Fund’s (IMF) figures.

Of the 115 countries for which data are available, South Africa is ranked in eight, just behind New Zealand and Sweden.

Notably, our neighbours Namibia and Lesotho are higher up on the ladder in 2nd and 3rd places, just behind Denmark, the front runner.

South Africa finds itself ahead of other countries such as the United Kingdom (25.7%), Australia (22.2%), Brazil (12.7%) and the United States (11.9%).

The world average, according to the IMF, was 15.4% in 2017.

“For a nation that has a high ratio but where taxpayers are receiving good value for money, a high tax burden might not be that detrimental,” StatsSA said.

“Countries such as Denmark, Sweden and Norway have high tax-to-GDP ratios, but these nations report the highest standard of living.

A very low tax-to-GDP ratio can be problematic as it may be a sign of an inefficient tax system.

“A government will struggle to provide services, build infrastructure or maintain public goods if it fails to collect taxes during periods of strong economic growth. Indonesia, for example, has in recent years committed itself to raise its tax-to-GDP ratio from 10% to 15%.”

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