PwC Survey Sheds Light On South Africa's Real Company Tax Burden

by Robert Lee, Tax-News.com, London

11 February 2008

A study of taxes paid to the South African government by companies has found that, like many other jurisdictions, corporate tax is only a relatively small part of the total tax contribution of the corporate sector to the fiscus.

The recently-released report by accounting and audit firm PricewaterhouseCoopers (PwC) concluded that any inquiry into the amount of tax paid by the corporate sector must look beyond corporate income tax and take account of all business-related taxes borne and collected.

It is thought that the PwC study is the first of its type undertaken in South Africa, and PwC says that the results will be of great interest to stakeholders such as National Treasury, SARS, the corporate sector, institutional investors, trade unions and others.

“The PwC study has corroborated what similar PwC studies of foreign countries have shown,” explained Charles de Wet, the PwC director responsible for the Total Tax Contribution project, which was based on research carried out at the end of 2007.

“The factual data arising from the survey is being put into the public domain by PwC to facilitate an informed debate on the present and future shape of South Africa’s tax system as it affects large companies,” he added.

Key survey findings included that:

- In South Africa, the total number of taxes levied (and either borne by the companies or collected by them) is currently 21, after the abolition of Regional Services Council levies and Retirement Funds tax. Prior to 31 March 2007, this number was 23, which included 21 national taxes and two local taxes. By way of comparison, similar studies in the United Kingdom identified only 22 business taxes, while 56 taxes were identified in a study in Australia and 31 in the Netherlands.

- The survey results corroborate the importance of large South African companies to government finances by way of taxes borne and collected. The 50 companies surveyed bore in aggregate R50.4 billion (USD6.5 billion) in taxes and collected a further R52 billion on behalf of government (national and local) in 2007. This represented 10.1% of government receipts in respect of taxes borne. In addition, 27.3% of the total corporate tax in 2007 and 31.9% of Secondary Tax on Companies (STC) was paid by these 50 companies.

- On average, the companies surveyed reported paying 8.7 different business-related taxes.

- An important issue highlighted by the PwC study was the importance to SARS (and to the corporate sector) of taxes collected by companies, though not borne by them, and paid over to SARS. These include PAYE, VAT and excise duties. On average, the companies surveyed reported collecting 3.2 different taxes and paying them over to SARS.

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