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Sharper tax focus on small businesses, cash economy

| Economic factors

The South African Revenue Service (SARS) is planning to pay more attention to ensuring that medium and smaller companies, and those in the "cash economy", pay their taxes. This comes after several years in which the focus has been mainly on tackling non-compliance in the large business sector.

SARS group executive Randall Carolissen said the revenue service would shift some of its attention to the cash-based economy and medium and small companies because "we have seen considerable churn in that segment in the levels of compliance and the levels of payment, and we have seen some inexplicable behaviour".

SARS is busy with a range of initiatives to close gaps in the tax system, particularly the base erosion and profit shifting initiative that tax authorities are pursuing globally. However, PWC director Kyle Mandy said although there was still a significant "tax gap", the base erosion and profit shifting was not where the tax gap is — rather it is with small and medium-sized businesses and the cash economy.

Dr Carolissen said SARS was also receiving information from other jurisdictions on South Africans with offshore accounts.

He was speaking at the release on Tuesday of the annual Tax Statistics bulletin compiled by SARS and the Treasury, which shows that there are 2.7-million registered companies registered, of which about 650,000 are assessed for tax purposes.

Of these, only about a quarter have positive taxable income, with 45% having zero taxable income and a further 30% reporting an assessed tax loss. The bulletin also reported that the 308 large companies with taxable incomes of more than R200m accounted for 59% of corporate income tax, reflecting the concentrated nature of SA’s economy. Corporate income tax was the third largest contributor to tax revenue, contributing just under 20% in 2013/14 down from a peak of 26.7% before the global financial crisis.

Personal income tax now contributes more than a third of total tax revenue, compensating for the weak corporate income tax performance post after the financial crisis, SARS said. There are now about 7-million individuals who pay income tax, though only 6.6-million of them have to submit tax returns.

The report shows 67% of individual taxpayers earned less than R250,000, and these individuals collectively contributed only 14% of personal income tax.

Johannesburg emerges as by far the largest and richest part of SA, with almost 630,000 taxpayers and an average taxable income of R355,310 a year — compared to R172,454 in the municipality with the smallest number of taxpayers in Ntambanana in KwaZulu-Natal.

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