South Africa’s tax collecting institution, the South African Revenue Services (Sars) has established new records in tax collecting in the last 12 months and has now in addition recently been identified as being a innovator in revenue collection globally.
Coming from a global standpoint, Sars has been identified as among the top 40 performing countries in a review of 183 for the simplicity with which companies are able to pay income tax in South Africa.
In addition, on a local level, initial results reported by Sars following the conclusion of the 2011 tax season indicates a rise in the nation’s tax base by 23% over this past year.
The global study Paying Taxes 2012 captured the simplicity of paying taxes spanning a variety of economies and was carried out by global auditing firm PricewaterhouseCoopers (PWC) together with the World Bank and the International Finance Corporation, a World Bank member company.
“Paying Taxes 2012 is really a one of a kind study … which measures the simplicity of having to pay taxes across 183 economies worldwide. It documents the taxes and mandatory contributions which a medium-size business has to pay within a given year in addition to calculating the administrative burden of paying taxes and contributions,” the official website notes.
From the market research, South Africa ranks 36th in the world, comparing positively with first world countries including Sweden at 44, Australia at 52 and the US at 69.
Botswana was the top performing African nation which has a ranking of 25, while Zambia at the same time performed very well, coming in at 42.
The survey calculated all taxes and contributions payable by businesses as specified by governments. This applied to contributions on a federal, national or local level, for business- (such as VAT), labour- (social contributions such as pensions) or income-related taxes, and which happen to have a direct effect on the company’s fiscal reports.
Results were determined by three sub-indicators with each scoring 33.3%: how much time it requires to put together returns; the quantity of tax payments made per year; along with the total tax rate. This latter indicator is the total tax liability of the firm as a percentage of profits after accounting for permitted deductions and exemptions.
Now in its seventh year, the analysis presents a number of intriguing observations into trends in world economies, from the biggest, China (121), to a few of the smallest economic systems such as the Maldives which ranked first. Venezuela came in at the bottom of the list.
In most cases, high-income economies fared much better than low-income economies where the tax process tended to generally be challenging and complex. In spite of that, the survey notes that 60% of governing bodies are adopting reform and are generally determined to help make taxation less complicated with the intention to stimulate economic growth.
In accordance with the actual results of the three indicators, a medium-sized business in South Africa tends to make nine tax payments per year, spends about two weeks putting together its taxes and has a tax burden of 33.1 % on its commercial profit.
Tax season closed
The South African tax season for 2010/2011 closed on 25 November 2011, with Sars confirming a growth of 23 % in tax returns submitted in comparison to the preceding year. An overall of 4.86-million returns ended up being collected.
Sars has contributed the majority of its good results to the introduction of its electronic tax return filing system, eFiling. This is certainly proving to be the most well-liked solution to paying taxes, and over 99 % of South Africans are now using it. Sars introduced eFiling in 2007.
Electronic tax return systems are likewise expanding in popularity globally, with an increasing amount of countries choosing this approach to help make it simpler to pay taxes, the PWC survey found.
“The most commonly encountered feature of tax reform this current year was the introduction of electronic systems – 66 economies currently have online filing and payment systems,” it notes.
South Africa’s finance minister Pravin Gordhan was elated with the preliminary findings.
“Some five million taxpayers submitted their returns by the due date. This is actually a wonderful accomplishment for a young democracy, and it begins to demonstrate the extent of compliance that we have,” he was quoted saying at the release of the preliminary results of the tax season on 31 November.
On top of that, eFiling is saving the nation millions annually, money which happens to be spent on modernising the tax system, Gordhan added.
Fast on refunds
And it is not only the taxman that benefits from the enhanced collection process. Over 98% of tax assessments are now finalized within 24 hours of receipt.
Speedier turnaround times signifies faster refunds, as numerous satisfied tax payers realised when they received their refunds within 72 hours of filing their assessments. Sars improved upon its refund turnaround time by over 10%, year on year.
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