Tag: income

Who pays taxes in South Africa?

National Treasury and the South African Revenue Service (SARS) have published the annual Tax Statistics for 2020.

The 2020 edition provides an overview of tax revenue collections and tax return information for the 2016 to 2019 tax years, as well as the 2015/16 to 2019/2020 fiscal years.

The highlights of the statistics include:

  • Tax revenue collected amounted to R1 355.8 billion, growing year-on-year by R68.1 billion (5.3%), mainly supported by Personal Income Tax (PIT) which grew by R35.3 billion (7.2%).
  • 1,776,301 (40.9%) of assessed taxpayers were registered in Gauteng;
  • 580,464 of assessed taxpayers lived in the Johannesburg Metro and were taxed on an average taxable income of R512,785;
  • 1,171,410 (27.0%) of assessed taxpayers were aged between 35 to 44 years;
  • 2,352,902 (54.2%) of assessed taxpayers were male and 1,985,021 (45.8%) were female;
  • The assessed taxpayers had aggregate taxable income of R1.6 trillion and a tax liability of R360 billion. Their average tax rate was 22.5% compared to 21.6% in the previous tax year;
  • Income from salaries, wages and other remuneration, as well as pension, overtime and annuities, accounted for 77.6% of total taxable income;
  • Out of the 780,480 companies assessed as at the end of July 2020 for tax year 2018, 25.2% had positive taxable income;
  • 46.6% had taxable income equal to zero and the remaining 28.2% reported an assessed loss.

 

Source: FNB

The sustained reduction of interest rates and relaxation of lockdown levels is providing a significant boost to the recovery of average income and cash flow among salaried middle-class consumers who hold full-time or formal employment. This is according to FNB insights based on the income trends among its Retail and Private Banking customers who earn a monthly gross income of between R10 000 to R60 000.

The Bank states that the financial position of the average middle-income customer is now approximately on par with levels recorded in February 2020, before the implementation of the national lockdown. Additionally, spend patterns of consumers are showing recovery with most categories like groceries and entertainment back to normal except categories like travel that are still significantly lower due to the travel bans instituted during lockdown. In contrast, average income among informally employed and self-employed consumers continues to lag, as a result, this income group may take longer to regain their usual average income levels.

Chief Executive of FNB Retail and Private Banking, Raj Makanjee says: “The lockdown has been the toughest experience for consumers, emotionally and financially. However, the income recovery and improving cash flow among middle-income consumers bodes well for the economy as middle-class consumers have significant spending power. The timely adjustment of interest rates has been instrumental in cushioning consumers who are servicing debt against severe financial difficulty. Similarly, our Cashflow Relief measures have allowed our customers who earned partial or no income during lockdown levels 4 and 5, to manage the impact of this difficult period on their finances,” he says.

According to FNB, the average income of consumers who are employed by SMEs (employing less than 10 people) was impacted the most over the course of lockdown. The Bank estimates that one in two of people employed by these SME businesses have seen a drop of at least 15% in average income. However, only one in five of those employed by larger companies (1000 employees or more) experienced an average income drop of 15% or more.

While the current income recovery trend is encouraging, the Bank is aware that consumers continue to face difficulties as COVID-19 is still part of our everyday reality. As a result, it continues to avail its resources and platform to help customers with money management across its Retail and Private Banking areas. FNB has also initiated money management conversations and interventions to help its customers in making smarter decisions about their finances, find practical ways to free up cash flow in this period and educating customers on their finances to ultimately enable them to make informed decisions.

“By having these meaningful conversations, we gain better understanding of our customers’ situations and have greater insight to practically assist them with freeing up cash flow. Specific spending solutions across our customers’ credit, essential and lifestyle spending are assessed for each customer to determine how best we can assist them, furthermore, we are helping customers to align their spending to the things that are important to them in order to achieve their financial goals.

Additionally, our eBucks Rewards continues to provide real help and timely relief to customers during this period. We’ve also expanded our eBucks benefits for seniors to offer extra support to our senior customers. In the coming weeks, we expect to introduce more platform-based tools to give customers even more control over their budgets” adds Makanjee.

By Carin Smith for Fin24

Two main trends have emerged regarding consumer debt levels in South Africa, according to the latest DebtBusters’ debt index for the second quarter of 2020 released on Monday.

Firstly, the index reveals a real-term decline in net incomes and secondly, consumers are supplementing this by increased unsecured lending.

“As a result of lack of growth in their net incomes, consumers find themselves in a corner and have been borrowing heavily, especially using unsecured loans, to make up the shortfall,” said Benay Sager, DebtBusters’ chief operating officer, in a statement.

Bigger earnings, bigger debt

Higher-income earners in South Africa in particular appear to have come under significant debt pressure, according to the debt index for the second quarter of 2020.

The increase in unsecured debt is, on average, 18% higher than it was four years ago. For consumers earning more than R10 000 per month, unsecured debt is 31% higher – for those earning R20 000 or more per month, unsecured debt levels are 42% higher than 2016 levels.

Consumers earning R20 000 or more a month had an unsustainable debt-to-income ratio of 138%. This is 12% more than during the same period in 2016.

The quarterly analysis by DebtBusters has been tracking client trends over the past four years.

“Although it’s impossible to determine the full impact of the hard lockdown based on just one quarter, the four-year-trend shows that for most consumers, debt levels are steadily increasing,” says Sager.

“This is because nominal incomes have been flat, so in real terms people have less income than in 2016, as inflation over the same period has been around 20% cumulatively.”

According to Berniece Hieckmann, head of GetUp, a new offering from financial services provider Metropolitan that includes debt consolidation and income protection, the backdrop of SA’s existing socio-economic landscape means the Covid-19 pandemic has the potential to financially cripple a generation of young South Africans at the very start of their professional journeys.

She points out that, while Covid-19 has had a devastating impact on the global population, young people, in particular, are anticipated to be one of the most significant casualties of the pandemic.

According to the International Labour Organisation (ILO), past recessions have shown that young individuals are usually first to be laid off work, while three out of four work in the informal economy, with little or no social protection. In addition, youth are over-represented in sectors ravaged by the pandemic, such as hospitality, retail and tourism.

“Our research revealed that debt is the lived reality of many millennials. As the financial burden on them increases, so is debt expected to mount – creating a trap that they may struggle to escape,” says Hieckmann.

Chief executive of FNB Easy, Philani Potwana, says to alleviate financial pressures, consumers should fully utilise the free benefits they receive from their banks. These benefits could free up much needed cash in consumers’ wallets, if taken advantage of.

These free benefits could include free cash withdrawals; prepaid airtime for free; free “send money” transactions; free card swipes; free app usage; free data, voice minutes and SMSs; free medical, legal and financial advice.

“Despite the prevailing challenges, we believe there’s an opportunity for all customers to get maximum value from their banking relationship,” says Potwana.

According to Investec chief economist Annabel Bishop, the lagged effect of the very severe lockdown the SA economy has experienced this year has started to come through in the data. The number of individuals losing their salaries over June fell by -20.7% year-on-year, according to the latest BankservAfrica data, while May saw a figure closer to -14% y/y and April around only -1.0% y/y.

The BankservAfrica Take-home Index (BTPI) records the majority of payments from large corporates and a fair number of medium-sized firms that are served by payroll service providers and firm-owned payroll administrators. Bishop points out that the recent decrease of the index may, therefore, not reflect the full impact of salary declines on small firms.

“In South Africa, state subsidies to low income earners have assisted households, and many high income earners and savers have managed to subsist on savings, but the middle income band has been severely affected, with many sliding into poverty, in turn contributing to further severe weakening in economic activity as demand has reduced,” says Bishop.

“The private sector is seeing markedly lower levels of renumeration overall this year compared to last year, while civil servants do not see this collapse, managing to avoid their salaries being reduced by and large, and instead even having agitated via unions for higher levels of renumeration despite the collapse in government’s tax revenues this year.”

After taking inflation into account, the average South African earned 1.5% less in December than in the same month in 2015.

December’s average monthly pay after taxes and other deductions was R14,102 and the median was R10,397, according to the BankservAfrica Disposable Salary Index (BDSI) released on Tuesday.

Ignoring inflation, South Africans on average received 5.1% more in December than the same month the previous year. But adjusted for inflation, December’s average pay came to R11,309 — 1.5% lower than R11,484 in December 2015.

“Real salary adjustments in December reflected the longest — and fastest — decline since the index started in 2011. Furthermore, this is the seventh consecutive month that salaries have fallen year-on-year in real terms,” BankservAfrica head of information services Caroline Belrose says.

“Employees in the South African formal sector have certainly not had anything to cheer about in 2016 — the weak rand and drought had a devastating impact on real incomes and expenses of employees and their families,” Economists.co.za chief economist Mike Schüssler says.

There was a silver lining in that there was a slight increase in the number of employees on the interbank payment system. This was 0.7% higher than in December 2015.

Like salaries, private pensions showed real-term declines year-on-year. The BankservAfrica Private Pensions Index of pensions that are paid into South African bank accounts showed a 1.7% year-on-year decline in real terms.

By Robert Laing for www.businesslive.co.za

High-and middle-income taxpayers are likely to bear the brunt of the tax increases Finance Minister Pravin Gordhan will announce in his budget on 22 February 2017.

Experts are expecting that Gordhan will turn to further increases in the top marginal income tax rate, as well as hiking capital gains tax and estate duty, in his quest to find the extra R28bn of tax revenue he pencilled into his medium-term budget for the 2017-18 tax year.

This is to plug the sizeable revenue shortfall which has resulted from lower-than-expected economic growth. The number may be closer to R30bn since growth may again have fallen short of Treasury estimates, says KPMG chief economist Lullu Krugel.

Gordhan could bring in as much as R12bn-R15bn if he declines to give any relief for fiscal drag, and if he gives only partial relief, as he did in last year’s budget. Fiscal drag occurs when inflation-linked salary and wage hikes move people into brackets with higher effective tax rates.

The proposed sugar tax and a possible “supertax” on companies and affluent individuals are among the other measures being speculated about, as are further hikes in the fuel levy and excise taxes. But few expect the minister will opt for the easiest route to raise a large amount of extra revenue — hiking the rate of value added tax (VAT).

The Davis Tax Committee has said there is room to increase indirect taxes such as VAT, emphasising that if this were accompanied by more pro-poor government spending, the poor might be better off as a result — but an increase would be politically unpalatable.

Judge Dennis Davis said last week that a VAT increase might not be politically close this year but it would certainly come into focus as a medium-term option.

One wild card is the special voluntary disclosure programme — the tax and foreign exchange amnesty — which took effect from October 1 and runs until June, allowing those with undisclosed foreign assets to declare and pay tax and penalties on these.

Sanlam economic adviser Jac Laubscher said in a report that a one percentage point increase in the VAT rate would result in about R22bn in additional tax. Without a VAT hike, “increases in income and wealth-related taxes, including adjustments to marginal rates of personal income tax, will be unavoidable”. Any increase in corporate income tax would be unwise given the imperative to raise the country’s growth rate, Laubscher said.

Nazrien Kader, head of tax at Deloitte, said the minister would have to explore all avenues and there was a global trend to wealth taxes and sugar taxes. But while she expected Gordhan might look to a one-off “surcharge” for companies and high-income individuals, along the lines of the transitional levy the new democratic government implemented in 1995-96, others expect a “supertax” for the wealthy could instead take the form of higher capital gains or dividend taxes, and/or a higher maximum marginal rate. In a private sector umbrella company you will receive a salary after deductions for tax, National Insurance, expenses, the umbrella fee, and any other pre-agreed costs.

Macquarie economist Elna Moolman suggests a two percentage point increase in the maximum marginal rate of income tax for people earning more than R1m a year could bring in R4.5bn. She expects a package of tax hikes that will aim to affect lower-income groups as little as possible but will target middle-and high-income taxpayers. One wild card is the special voluntary disclosure programme — the tax and foreign exchange amnesty — which took effect from October 1 and runs until June, allowing those with undisclosed foreign assets to declare and pay tax and penalties on these.

Davis suggested last year this could raise as much as R10bn-R15bn and he repeated this again last week, saying indications from banks overseas were that this was attainable. It was too early for the finance minister to budget for the special voluntary disclosure programme in the current 2017-18 fiscal year.

The Davis committee has launched a probe into SA’s tax administration system. Davis said it focused on whether the model the Katz Commission recommended in the 1990s was still appropriate in 2017, and whether the revenue service was positioned to implement plans to target high net-worth taxpayers, base erosion and profit shifting.

By Hilary Joffe for www.businesslive.co.za

Labour unions have asked President Jacob Zuma to make good on a promise to cap the salaries of high-income earners, accusing business of not co-operating with them to improve economic conditions.

In their written submission to a meeting of the presidential working group on labour at the Union Buildings on Tuesday, trade union representatives said: “We need to revisit the notion of a package to raise the incomes of those at the bottom, combined with a freeze on the salaries of high income earners.”

They said a new wage policy should address the wage inequality in the economy.

The workers’ leaders had strong words for Zuma, saying the government hasn’t followed through on economic policies and lacks clarity on what has happened to some of the ANC’s promises.

Despite Zuma saying in his opening remarks that cooperation between business and labour successfully softened the blow of the 2008 global economic downturn, labour labelled the action “inadequate”.

The unions also said business is not doing its bit in helping to keep the economy afloat.

“While society is in crisis, many in business appear oblivious, raking in large profits, salaries and bonuses, and taking the social surplus offshore.

“Social stability, which business espouses, is not possible unless current conditions are radically transformed,” they said in their input.

Labour has suggested a 6- to 12-month programme to curb the economic crisis and change the structure of the economy.

The interventions include pushing government to “implement its own policies and meet its publicly made commitments” on issues like more local procurement and industrial policy.

New policy approaches needed

They also include considering new policy approaches where old ones have “clearly failed”, and where different policies are needed to ensure structural economic transformation.

Labour also said government should tell them how it has progressed on new policies like the black industrialists’ programme, and also on policies where changes are being considered.

“Government needs to make a frank and honest assessment of developments, and what obstacles (there) are to realisation of government policies in key areas,” the submission said.

Labour also called for a discussion on the ratings downgrade, and measures taken to avoid it. They said some of the policies government has adopted to avert the downgrade had “the effect of worsening the economic situation, and deepen(ing) the very economic problems which ratings agencies claim to be concerned with”.

Labour is, for instance, critical of government’s austerity measures, arguing it should be spending more to expand the tax base.

Zuma in his opening remarks thanked labour for cooperating with business and government to avoid recent rating downgrades, among others by going on an international pro-South Africa roadshow.

“If we work together in the manner we have done in the past few months, I am convinced that we will overcome the challenges that we face,” Zuma told the meeting.

Zuma said the sectors should all work together as they had done in 2008, when a global economic downturn loomed.

“We have had success before of working together to find practical solutions to our immediate challenges. As you would recall, after the onset of the global economic crisis in 2008, we crafted a strategy to cushion the impact of the crisis on workers.

“We need that spirit to address our challenges today.”

By Carien du Plessis for Fin24

The Credit Suisse Research Institute has published its sixth annual Emerging Consumer Survey – a detailed study profiling consumer sentiment and its drivers across the emerging world. South Africa once again ranks at the low end of a range of the survey’s indicators with continued disparities between income groups.

The 2015 survey shows a marked decline in overall consumer confidence, and not only has the gap between high and low-income groups increased but much reduced optimism in the middle income groups was also evident. A net 4% of respondents expected their personal finances to improve over the next six months, considerably lower than 11% last year.

Inflation expectations are elevated and a net 65% of respondents expected higher inflation, compared with the survey average of 46%. This contrasts with only a net 1.5% of consumers anticipating increased income over the next 12 months.

The majority of consumers still did not believe that now was a good time to make a major purchase, although sentiment was less negative than last year. Perhaps surprisingly, those who stated that they had no extra money for saving declined from 38% to 30%, putting South Africa below the survey average of 32%. There remain large disparities between low and high-income earners, which further increased in 2015.

Of note was a marked deterioration in the optimism of the low-income group (monthly incomes below ZAR 3,000), with a net 16% anticipating that the state of their personal finances would deteriorate, compared with 6% the year before.

South African consumers face multiple challenges in 2016, with higher inflation due to severe drought conditions and a weak currency, as well as likely interest rate increases demanding higher shares of already constrained disposable incomes.

The prospect of job cuts in the mining industry looms large, and will likely place further pressure on low-income households. Mid- and higher-income households will likely face further interest rate hikes this year and, combined with currency weakness, constrain purchases of higher-end, often imported products.

Follow us on social media: 

               

View our magazine archives: 

                       


My Office News Ⓒ 2017 - Designed by A Collective


SUBSCRIBE TO OUR NEWSLETTER
Top