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Cape Town - South Africa performs relatively poorly on the time it takes to get a VAT refund (26.6 weeks), according to the latest edition of Paying Taxes 2018, a report by the World Bank.
It compares the world's tax regimes from the point of view of companies paying taxes and provides information to help policy decision making and tax reform.
Further analyses by PwC, however, found that this time period of 26.6 weeks in SA could actually be far less for a medium-sized company.
SA ranked 75th out of the 179 countries scored for the sub-indicator on VAT refunds, slightly below the world average (27.8 weeks) and Africa average (35.3 weeks).
Time to comply with VAT refunds in SA was found to be 8.5 hours compared to the world average of 18.4 hours and the Africa average of 22.3 hours.
The report found SA makes relatively low use of labour and other taxes compared to other countries. However, SA has a relatively high rate of profit taxes of 21.7%, which is well above the global and Africa averages of 16.3% and 18.3% respectively.
It cautions that there is a risk that the total tax rate in SA will increase in future as pressure mounts to introduce new taxes on business to fund increasing spending pressures such as social security reform, national health insurance and education.
SARS regarded as user friendly
The report found that SA Revenue Service (SARS) filing and payment systems are generally regarded as user friendly and not overly time consuming.
The primary area where improvement could be made is on corporate income tax where SA’s time to comply is above the world and Africa averages.
At the same time SA was found to be a leader regarding the number of tax payments businesses have to make, thanks to the widespread use of electronic payment systems, according to the reports by the World Bank and PwC.
They found the use of technology by business and government in tax compliance is reducing the burden on business. It examined the ease of paying taxes in 190 economies. The PwC report models business taxation in each economy by using a medium-sized domestic company as a case study.
Technology continues to be a major driver of reductions in the time it takes to comply and in the number of tax payments made, the study found.
SA ranks 14th out of 190 countries. According to Kyle Mandy, tax policy leader at PwC, it is mainly due to this achievement that SA's overall ranking for ease of paying taxes is 46th out of 189 countries and described as "reasonably well".
Mandy cautioned, however, that SA's good performance in the number of tax payments made also represents a risk to its future overall ranking as more countries introduce electronic filing and payment systems and catch up with the "leaders".
According to Rita Ramalho, acting director, global indicators group, development economics at the World Bank, the continued reduction in the burden of paying taxes, in time and number of payments, is welcome news.
"The use of technology can provide significant benefits for both taxpayers and tax collectors, and we look forward to its increased use in efforts to improve the ease of doing business for medium sized enterprises in countries around the world,” she said.
Time to comply
The global average "time to comply" declined by 5 hours to 240 hours and the average number of payments went down by one to 24. Globally the time needed to comply with labour taxes showed the greatest reduction over the 12 years the annual study has been done. SA, for instance, was found to make relatively low use of labour and other taxes compared to other countries.
However, SA was found to have a relatively high rate of profit taxes of 21.7% which is well above the global and Africa averages of 16.3% and 18.3% respectively.
South Africa takes on average 210 hours to comply with filing tax returns and paying taxes - ranking it 99th globally in this regard. PwC's study found the average time could be even shorter at 200 hours. The majority of time spent on compliance was in the preparation phase.
The primary area where improvement could be made is on corporate income tax where SA’s time to comply (96 hours) is above the world (61 hours) and Africa (77 hours) averages, according to Mandy.
The study also found the global movement in the total tax and contribution rate (TTCR) is virtually flat, increasing by just 0.1 percentage points to 40.5%, with some increases in corporate income taxes and turnover taxes.
SA’s TTCR (28.9%) compares favourably with global (40.5%) and regional (47.1%) averages where it is ranked 42nd out of 189 countries. However, it ranks behind some of its regional neighbours such as Zambia, Namibia, Mauritius and Botswana.
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