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South Africa's Tax Reforms Fail To Increase Revenues

by Robert Lee, Tax-News.com, London

12 July 2017


Tax measures announced in the South African Government's 2016 Budget failed to boost tax revenues, the International Monetary Fund (IMF) has said.

The Budget, announced in February 2016, aimed to boost revenues by almost ZAR50bn (USD3.7bn) over three years, with a consolidated revenue target of ZAR1.3 trillion, representing 30.2 per cent of gross domestic product (GDP), set for 2016-17.

The reforms included: a ZAR0.30/liter increase in the general fuel levy; curtailing measures to mitigate the impact of bracket creep, mainly for lower- and middle-income earners; and a rise of about seven percent in excise taxes on alcohol and tobacco products.

There were also adjustments to the effective capital gains tax rate, which increased from 13.7 percent to 16.4 percent for individuals, and from 18.6 percent to 22.4 percent for companies.

Transfer duty on property sales above ZAR10m was raised from 11 percent to 13 percent from March 1, 2016.

In addition, the Government proposed to implement a tire levy with effect from October 1 2016, and a sugar tax was introduced on April 1, 2017.

But the IMF said that lower than expected economic growth and revenue buoyancy dampened the impact of the tax measures.

It recommended that the country should consider moderate increases in the standard value-added tax rate, higher taxation of property, and measures to reduce base erosion and profit shifting.

TAGS: South Africa | tax | value added tax (VAT) | property tax | fiscal policy | gross domestic product (GDP) | budget | International Monetary Fund (IMF) | excise duty | individual income tax | Africa

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