A global view of paying taxes
Economies around the world are adopting a range of policies as they strive to strike a balance between raising tax revenues and encouraging growth, according to a report by the World Bank Group and PwC.
The Paying Taxes 2014: The Global Picture report found that 32 economies continued to take steps from June 2012 through May 2013 to make it easier and cost less for small and medium businesses to pay taxes. The study of tax regimes in 189 economies, released in November 2013, found that for the third consecutive year the most common tax reform was the introduction or improvement of online filing and payment systems for tax compliance.
South Africa’s worldwide tax payment ranking improved from 32nd position to 24th position, the same position as in 2011. The study mentioned the success of e-filing and filing methods as the biggest contributor to the country’s improved ranking, as well as a reduction in the total tax rate. The average business in South Africa only has to make seven tax payments, whereas the average in Africa is 36.
The study shows a total tax rate of 54.3% for Africa, which is well above the world average of 43.1%. Despite this, the total tax rate in Africa has decreased significantly since 2004 from 70.3% to 54.3%.
Having decreased from 33.3% in 2012 to 30.1%, South Africa’s total tax rate compares better to the worldwide average. The decrease is largely due to the dividend tax replacing secondary tax, which effectively moves the tax liability from the company to the shareholder.
The country’s tax system continues to be ranked number one among the BRICS (Brazil, Russia, India, China and South Africa) economies for its efficiency and success in easing the compliance burden for taxpayers.
In the overall tax payment ranking, the United Arab Emirates was first. Guatemala made the biggest improvement in easing the payment of taxes during the past year, while Europe and Central Asia received acknowledgement as the regions who had improved most over the past five years.
Revenue authorities around the world are continuously working to streamline and modernise processes. Taxpayers in 76 of the 189 economies covered in the study can now file tax returns electronically from virtually anywhere on the planet, as proven by cosmonaut Pavel Vinogradov, an international space station crew member. He has become the first person ever to pay taxes from space.
Article written by Conrad Smith of Tenk Loubser & Associates (021 852 0382).