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domesticresourcemobilisationtax study 2012
abbreviations 2
executivesummary 3
domesticresourcemobilisation:anoverview 5
1.0 introduction 5 1.1 Theobjectivesofthestudy 5
1.2 Thevalue-addofDomesticResourceMobilisationinSouthAfrica 5
2.0 theimportanceandroleoftaxesinthesouthafricaneconomy 6 2.1 Introduction 6
2.2 Theroleoftaxinalleviatingpovertyandinequalities 6
3.0 analysisofthetaxinstruments/sourcesinsouthafrica 6 3.1 Introduction 6
3.2 TaxrevenuecollectioninSouthAfrica 7
Figure1:Taxrevenuesource2006/07 8
Figure2:Taxrevenuesource2010/11 8
3.3 TheanalysisofthetaxinstrumenttrendsinSouthAfrica 9
3.3.1 PersonalIncomeTax(PIT) 9
Figure3:Distributionoftaxpayers(individuals’percentage)2007–2010 9
Figure4:Distributionoftaxpayersoverselectedtaxableincome2007–2010 10
3.3.2 CompanyIncomeTax(CIT) 10
3.3.3 CompanyIncomeTaxbySector 11
Figure5:Taxassessedbysector(allcompanies),2007 11
Figure6:Taxassessedbysector(allcompanies),2010 12
3.3.4 ValueAddedTax(VAT) 12
4.0 Highnetworthindividuals(Hnwis) 13
sectoranalysis 14
1.0 miningsector 14 1.1 Overviewandimportanceofthesectorintheeconomy 14
1.2 Sector-specifictaxregimeissues 14
GoldIndustryTaxation 15
VAT 15
1.3 Analysisofthetaxregime 15
EffectiveTaxRate 15
ResourcesRentTax 16
2.0 Financialsector 16 2.1 Overviewandimportanceofthesectorintheeconomy 16
VAT 17
3.0 automobilesector 18 3.1 Overviewandimportanceofthesectorintheeconomy 18
3.2 Sector-specifictaxregimeissues 19
CASESTUDY–VOLKSWAGENSOUTHAFRICA 20
VolkswagenGroupbackground 20
Regionalcomparativeanalysis 20
Figure7:WorldcarmarketvsVolkswagenGroupdeliveriestocustomers,January2011–June2012 20
Figure8:Growthinpercentagesanddeliveriesofpassengerandlightcommercialvehiclestocustomersbyregion,2010–2011 21
VolkswagenGroupSouthAfrica 23
SalesPerformance 23
conclusionandrecommendations 25
reFerences 27
contents
anc AfricanNationalCongress
aPdP AutomotiveProduction
DevelopmentProgramme
cbu CompletelyBuiltUnit
cGt CapitalGainsTax
cit CorporateIncomeTax
drm DomesticResourceMobilisation
Fdi ForeignDirectInvestment
Gci GlobalCompetitiveIndex
GdP GrossDomesticProduct
Gst GeneralSalesTax
Hnwi HighNetWorthIndividual
ircc ImportRebateCreditCertificate
itd InternationalTaxDialogue
abbreviations
mdG MillenniumDevelopmentGoal
metr MarginalEffectiveTaxRate
midP MotorIndustryDevelopmentProgramme
mnc MultinationalCompanies
nGo Non-GovernmentalOrganisation
oi OxfamInternational
Paa ProductiveAssetAllowance
Pit PersonalIncomeTax
sacu SouthernAfricanCustomsUnion
sars SouthAfricanRevenueService
savca SouthAfricanVentureCapitalAssociation
sbc SmallBusinessCorporation
stc SecondaryTaxonCompanies
vat ValueAddedTax
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executivesummary
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Developingcountriesfacechallengesincludingwidespreadpoverty,everincreasingunemploymentandwideninginequalities.SouthAfrica’sexperienceofthesechallengeshasgivenriseinthepost-Apartheideratoanexaminationofthenatureanddynamismofincomedistributionandthefactorsthatdriveit;theroleoffiscalpolicyasaredistributivetoolandtheprogressivityoftaxandtransferpolicieshavecomeintosharpfocus.
Thefailurebyanystatetotaxadequatelyisnotonlyanindicatorof,butalsoformsthebasisfor,underdevelopment.Thereforedifficultiesincollectingtaxesaregenerallyareflectionofaweakeconomyandanineffectivegovernment.Mostimportantly,ifgovernmentsdonothaveadequatetaxrevenuestheyarethenforcedtorelyonexternalsourcesofsupporttoprovidepublicservices.
Therehasbeensomeconsensusamongpolicymakersandscholarsthatthemajorcontributionoftaxpolicyasaredistributivetoolshouldbetoraisetherevenuesthatareessentialtocorrectinghorizontalinequities.
Taxesfundpublicinfrastructureandfacilitatesocialprogressaswellaseconomicdevelopment.Governmentactivitiesreliantontaxrevenuesincludethefundingofessentialpublicservicessuchasthepoliceservices,defenceforce,justicesystem,healthservices,welfare,socialservices,andeducationandtraining.
InSouthAfrica,taxesareadministeredbytheSouthAfricanRevenueService(SARS)andincludePersonalIncomeTax(PIT)chargedat40%forthetoptaxbracket,CorporateIncomeTax(CIT)at28%,WithholdingTaxonDividendsat15%andValueAddedTax(VAT)at14%.The2010/11taxrevenuecontributionsshowthatPITcontributed34%,VAT27.2%andCIT20%tothenationalrevenue–thusthePITshoulderedalargershareofthetotaltaxburdencomparedtoVATandCIT.
Regardingthetaxburden,theanalysisshowsthatthehighesttaxableincomegrouphastheleastnumberoftaxpayersbuttheybringinasubstantialamountoftaxableincomecomparedwiththeothergroups.Thismaybebecausetheirtaxrateishigherthantheotherincomegroupsandthereforetheybearalargershareofthetotaltaxburdenincomparativeterms.However,analternativeexplanationisthatthisgrouphassubstantiallyhigherper-capitaincomes.
Thefinancialsector,consistingofinsurance,realestateandbusinessservices,iscontributingmoretotheCITandisthereforebearingmoretaxburdencomparedtotheothersectors.
HighNetWorthIndividuals(HNWIs),individualswhoareeitherearningmorethanR7millionperannumorhaveassetsofmorethanR75million,arenotproperlycapturedbySARSandthereforenotproperlytaxed.AninvestigationbySARShasidentifiedapproximately9300suchindividualsinSouthAfricawhoarenotcomplianttaxpayers,andacollaborationbetweenbanksandSARSrevealedthattheremayactuallybeasmanyas20000.Worthnotingisthefactthatwhile2300ofthe9300identifiedbySARSareontheirregistertheyarenottaxcompliant.Theremainingbalanceof7000arenotevenregisteredwithSARS.OnlyaverysmallfractionofHNWIsinSouthAfrica,about360individuals,areregisteredwithSARSandtaxcompliant.ThelosstothefiscusduetothefailuretotaxHNWIsisestimatedatR48billioninpotentialtaxrevenue.Thisisasubstantialamountofmoneythatcouldbechannelledtothedevelopmentofthecountry.
Asectoralanalysisrevealsthatminingcompaniespaythenormal28%CorporateIncomeTax.However,mining,includinggoldanduraniumcompaniesaretreateddifferently.TheMarginalEffectiveTaxRate(METR)oncapitalfortheminingsectorisverylowbecausecapitalexpendituresrelatedtominingareexemptedfromtax.Thereiscurrentlynounambiguousempiricalevidencetosupportthenotionthatthesecapitalequipmenttax
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incentivesarebenefitingtheminingsectorinSouthAfrica.Therecommendationtherefore,inthisregard,istograduallyremovethesecapitalequipmenttaxincentivesinorderfreedomesticresourcesfordevelopmentalinitiatives.
ThefinancialsectorislargelyexemptedfromVATandisonlysubjecttostandardtaxtreatmentwithnoparticularsectorspecificincentives.WithanoverallweightedaverageMETRoncapitalofjustunder30%,thefinancialsectorbearsoneofthehighestmarginaltaxburdensoncapital.Thissectoralsohasmanysophisticatedinstruments.ThepropertaxingoftheseinstrumentsisachallengetoSARSbecausetherevenueserviceispresentlylaggingbehindintermsofproperlyunderstandingtheinstruments’structuringandfunctioning.TherecommendationisthatSARSshouldembarkonaneducationalendeavourthatwillenablethemtoproperlyunderstandtheseinstrumentsinordertoappropriatelytaxthissectorandmobilisemoredomesticresourcesfordevelopment.
TheautomotiveindustryreceivessignificantgovernmentsupportthroughasetofincentivesknownastheMotorIndustryDevelopmentProgramme(MIDP).AlthoughtheSouthAfricangovernmenthasbeenreducingitssupportinsubsequentrevisionsoftheMIDP,theincentivesstillremainsubstantial.Thissectorisexceptionallysuccessfulbecauseitisdependentonthegenerousincentiveschemeprovidedbygovernment.Itbasicallyreliesheavilyonbothimportedcapitalandimportedinputs.However,itisimportanttonotethattheeffectivenessofthetaxincentivesfadesintime,reaffirmingthetheoreticallyfoundedhypothesisthattaxincentivesmayaffectsomebusinessdecisionsparticularlyintheshortrun,buttheyarenotaprimaryconsiderationforinvestorsinthelongrun.Itisthereforerecommendedthatthecurrentsetoftaxincentivesforthissectorbegraduallyeliminatedinordertofreeresourcesforotherdevelopmentalneeds.
1.0 introduction
Thepost-apartheiderainSouthAfricahasseenthecountrybattlingwiththetripledevelopmentalchallengesofwidespreadpoverty,increasingunemploymentandwideninginequalities.Thesechallengeshavegivenrisetointerestintheexaminationofthenatureanddynamismofincomedistributionandthefactorsunderlyingit.Moreimportantlythoughthesechallengeshavebroughtintosharpfocustheroleoffiscalpolicyasaredistributivetoolandtheprogressivityoftaxandtransferpolicies.
Thisfocusontheinteractionbetweentheprogressivityoftax,transferpoliciesandincomedistributionhasbeennecessitatedbydevelopmentalissuesinSouthAfrica–encompassingtaxincidence,governance,taxadministration,taxevasion,thepredominanceofindirecttax,andcapitalandwealthtax.
TherehasbeensomeconsensusamongSouthAfricanpolicymakersandscholarsthatthemajorcontributionoftaxpolicyasaredistributivetoolshouldbetoraisetherevenuesessentialforcorrectinghorizontalinequities.Therefore,taxsystemsshouldbecharacterisedbybroadbases,limitedexemptionsandlowrates.
1.1theobjectivesofthestudy
ThemainobjectiveofthestudyistoevaluatethetaxationandexpenditureregimesinSouthAfrica,andtoinformthedesignofdomesticresourcemobilisationingovernmentprogramminginthefuture.Thestudyaimstocontributetoamodeloftaxationthatstrengthensthestate’scapacitytofinancetheprovisionofessentialservices.
Specifically,thestudyaims:i. TodeterminetheimportanceandtheroleoftaxesintheSouthAfricaneconomyii. ToanalysethetaxinstrumentsortaxsourcesinSouthAfricaiii. ToassesstheeffectivetaxburdeninSouthAfricaiv. ToperformananalysisofHighNetWorthIndividuals’taxpracticesv. Toanalysethetaxregimeinthreedifferentsectors
1.2thevalue-addofdomesticresourcemobilisationinsouthafrica
InSouthAfrica,thevalue-addofdomesticresourcemobilisationisrealisedinthefinancingofgovernmentprojectstocoverbasicessentialpublicservicessuchaspovertyalleviation,thereductionintherateofunemployment,improvementintheeducationandhealthsystems,ruraldevelopment,infrastructuredevelopment,andcombatingcrime.
TherearefourmainsourcesofgovernmentrevenueinSouthAfrica:taxes,servicecharges,grantsandloans.Inthe2009/10fiscalyear,taxesaccountedfor81.5%oftotalgovernmentrevenue(Durham&Verwey,2012).Inrealterms,SouthAfricantaxrevenuehassurgedbyapproximately70%overtheperiodspanning2000/01–2010/11.Thismeansthatinabsoluteterms,theSouthAfricanbudgethassignificantlymoreresourcesavailableforallocationthanadecadeago.Giventhattherateofresourcegrowthhassurpassedthepopulationgrowthrate,thebudgethasmorerevenueavailablepercapita,thanitdidtenyearsago(Durham&Verwey,2012).
SouthAfricacontinuestoaddressthelegacyofapartheidwhichpresenteddevelopmentalchallengessuchasinadequateinfrastructure,widespreadpovertyandinequality,structuralunemploymentandaslowpaceoftransformation.Inlinewiththisobjective,the2012NationalBudgetproposalsfocusondevelopinginfrastructure,supportingjobcreationandimprovinglocalgovernmentservices.Education,healthcareandsocialprotectioncontinuetoaccountforthelargestshareofgovernmentresources,withspendingonthesefunctionalareasgrowinginaveragerealtermsby1%,1.5%and3%respectively.
domesticresourcemobilisation:anoverview
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ForSouthAfricatosustainablyincreaseitsspendingoneducation,healthcareandsocialprotectionoverthedecadestocome,domesticresourcemobilisationwillbecrucial.Mobilisingdomesticresourceswillensurecountercyclicality,debtsustainabilityandintergenerationalequity.
2.0 tHeimPortanceandroleoFtaxes intHesoutHaFricaneconomy
2.1introduction
Taxesfundpublicinfrastructurewhichiscrucialinthedeliveryofpublicservices.Theyalsofacilitatesocialprogressandeconomicdevelopment.Throughtaxexemptionsomeindustriesmaybeabletoinvestmoreandthereforeacceleratetheirowngrowthandultimatelynationalgrowth.Taxesmayalsobeusedtodiscourageuseofcertainproductsbyimposingheaviercharges,suchassintaxeswhichareimposedontobaccoproducts.Localindustriesmaybeprotectedthroughtaxationbyimposinghighcustomsdutiesonforeigngoods.Moreover,taxationcanbeusedtoreduceinequalitiesinwealthandincomebyimposingprogressivelyhighertaxesonhigherincomegroupsasinthecaseofestateandincometax.
2.2theroleoftaxinalleviatingpovertyandinequalities
Theroleoftaxinthealleviationofpovertyandinequalitiesiscloselylinkedtotheconceptofsocialsecurity.Socialsecurityreferstotheactionprogramsofthegovernmentintendedtopromotethewelfareofthepopulationthroughassistancemeasuresguaranteeingaccesstosufficientresourcesforfoodandshelter.Thesemeasures,suchastheprovisionofsocialgrants,aimtopromotehealthandwellbeingforthepopulationatlargeandinparticularforpotentiallyvulnerablesegmentssuchaschildren,theelderly,thesickandtheunemployed.
3.0 analysisoFtHetaxinstruments/sources insoutHaFrica
3.1introduction
Asdefinedearlierinthestudy,taxesareessentialforthefinancingofgovernmentactivities,butatthesametime,theyshouldbesetandadministeredtobeasgrowthenablingaspossible.TherevenueraisingauthoritiesinSouthAfricaaretheNationalTreasuryresponsibleforsettingthetaxpolicy1andSARSwhichadministersthetaxpolicy.
Inprovidingtherevenuetofundallgovernmentinitiatives,SARSplaysavitalenablingroleforgovernmentservicedeliverythatenhanceseconomicgrowthandsocialdevelopment,whilesupportinggovernment’sintegrationintotheglobaleconomy.Itisthereforenecessarytoensuregoodgovernancethroughouttheagencyandobservetheprinciplesofrelevantgoodpracticewithintheparametersofpublicsectorlegislation.Generally,administrativereformsthroughmodernisationprogrammeshavecontributedmoretothespreadofthetaxburden,andhaveimprovedtheabilityoftherevenueservicetodetectanddeternon-compliance,therebypromotingfiscalrewardsandimprovingaccuracyofprocessingandservicetotaxpayers(Ramalho,2007).
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(1) Seewww.sars.gov.zafordetailedinformationontaxpolicyinSouthAfrica.
Thebasicgoalofanytaxsystemincludesraisingrevenue,equityandfreedomfromeconomicburden.TheSouthAfricanincometaxsystemisacombinationofaprogressiveandproportionalrate.Inanincreasinglyglobaleconomy,itisalsoimportantthatataxsystembecompetitive,butwithoutcontributingtounfavourabletaxconsequencesby,forinstance,discouragingtaxcompliance.TaxadministrationinSouthAfricafunctionsinacomplexandfastchangingenvironment.Anewrangeoffactors,arisingfromthelocal,regionalandinternationalcontexts,createanimpactonthecapacityofgovernmenttocollecttaxesanddevelopitseconomy.Similarly,globalisation,tradeliberalisation,theestablishmentofregionaleconomicandpoliticalblocks,therapidmovementofcapitalacrossnationalboundaries,innovationsintelecommunicationsandtechnologyingeneralallimpactongovernment’sabilitytogeneraterevenue(Gelbetal.,2007).However,atthesametime,thereisagreaterneedtoraiserevenueforpublicspending–notonlytocushionthefinancialdifficultiesexperiencedbythepublic,butalsotosustaineconomicgrowth.
Acommitmenttoasoundincometaxsystemcontributestowardwellinformedpolicyformulationandeffectivefiscalandeconomicpolicydecisionsandalsofacilitatesamoreeffectiveresponsetochangingeconomicconditions,therebyhelpingtoreducetheincidenceandseverityofeconomicandfinancialcrises(NationalTreasury,2009).
3.2taxrevenuecollectioninsouthafrica
Taxesarethemostimportantsourceofgovernmentrevenue.ThethreemainsourcesofnationaltaxrevenuearePersonalIncomeTax(PIT),CompanyIncomeTax(CIT),andValueAddedTax(VAT).Robusteconomicgrowthduringthemid-2000sandimprovedtaxcomplianceandadministrationhaveresultedinanupwardtrendintaxrevenueoverthelasttenyears.However,the2007/08globalfinancialcrisisnegativelyaffectedtaxrevenues.TheprojectionsbytheNationalTreasuryreflectarecoveryoftaxrevenuesinthemediumterm,from24.7%to25.5%ofGDPin2011/12to2013/14respectively(NationalTreasury,2012).
SARSwasresponsibleforthecollectionof98%ofthetotalbudgetrevenueofgovernmentor88.9%oftheconsolidatedrevenueofgovernment(whichincludesnon-taxrevenue,revenuefromprovinces,socialsecurityandselectedpublicentitiesaswellastheSouthernAfricanCustomsUnion(SACU)payments)in2010/11(NationalTreasury,2011).
SouthAfricahashadthebenefitofarevenueandcustomsadministrationwithanexceptionalrecordofgrowingrevenueyieldduringperiodsofeithereconomicgrowthorcontraction.
ThetaxsysteminSouthAfricaisresidence-based.Thisimpliesthatresidentsare,subjecttocertainexclusions,taxedontheirworldwideincomeirrespectiveofwheretheirincomewasearned.Non-residentsare,however,taxedontheirincomefromaSouthAfricansource.ForeigntaxesarecreditedagainstSouthAfricantaxpayableonforeignincomeandmaybesubjecttoanyprovisionsintaxtreatiesthatSouthAfricahasinplacewithothercountries(NationalTreasury,2011).
PIT,CITandVATcontributeapproximately80%oftotaltaxrevenue,whilethefuellevy,exciseandcustomsdutiesaccountforaround12%andothertaxesareresponsibleforthebalance.Themaindriversoftheupwardmovementinnominaltaxrevenueincludeamongotherthingsinflation,highcommodityprices,highwagesettlements,increasesinthevalueofimports,privateconsumptionintheeconomyaswellasimprovementsintaxadministrationandtaxcompliance(NationalTreasury,2011).
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Figure1:taxrevenuesource2006/07
CustomsDuties(5%)
SecondaryTaxonCompanies(3%)
FuelLevy(5%)
SpecificExciseDuties(3%)
ValueAddedTax(27%)
Other(5%)
PersonalIncomeTax(28%)
CorporateIncomeTax(24%)
Figure1belowshowsthatPITcontributed28%tototaltaxrevenuein2006/07,VAT27%andCIT24%.Thismeansthatin2006/07PITpayersshoulderedalargershareofthetotaltaxburdencomparedtoVATandCIT(NationalTreasury,2011).
Figure2:taxrevenuesource2010/11
Source: National Treasury, 2011 Statistics
Other(4%)
PersonalIncomeTax(34%)CustomsDuties(4%)
SecondaryTaxonCompanies(4%)
FuelLevy(5%)
SpecificExciseDuties(3%)
ValueAddedTax(27%)
CorporateIncomeTax(20%)
Thesituationwasrelativelythesameforthe2010/11periodasshowninFigure2above–thenoticeabledifferencebeingthatPITcontributedevenmoretototaltaxrevenueat34%comparedwith28%in2006/07.TherewasamarginalincreaseinthecontributionofVATtototaltaxrevenuefrom27.1%in2006/07to27.2%in2010/11.ThecontributionofCITtototaltaxrevenueexperiencedadeclineoverthesameperiodunderreviewfrom24%to20%(NationalTreasury,2011).ThismeansthatPIThascontinuedtobearalargershareofthetotaltaxburdencomparedtoVATandCITbetween2006/07and2010/11.
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3.3theanalysisofthetaxinstrumenttrendsinsouthafrica.
Thisstudywillfocusmainlyonanalysingtrendsinthefollowingtaxinstruments:• PersonalIncomeTax(PIT)• CompanyIncomeTax(CIT)• ValueAddedTax(VAT)3.3.1Personalincometax(Pit)PersonalIncomeTaxisataxleviedonthetaxableincome,i.e.grossincomelessexemptionsandallowabledeductions,ofapersonforaspecificyearofassessment.Taxablecapitalgainsalsoformpartoftaxableincome.Individualsgenerallyreceivemostoftheirincomeassalaryorwages,pensionorretirementpayments,andinvestmentincome(interestanddividends).Someindividuals,suchassoleproprietorsandpartners,mayalsohavebusinessincomewhichistaxableaspersonalincome.
ThenumberofindividualsinSouthAfricaregisteredforincometaxhasgrownfromover4.7millionin2007toover5.9millionin2010.Subsequenttogrowingatarateof9.3%in2008,theannualgrowthrateinregisteredindividualsslowedto6.9%in2010(NationalTreasury,2011).
However,thenumberofemployedpeoplecapturedbyStatisticsSouthAfricabetween2008and2011ishigherthanthenumberofindividualscapturedintheSARSregister.ThepercentagedifferencebetweentheStatisticsSouthAfricaregisterandSARSregisteronthenumberofpeopleemployedis54.9%for2010,57.3%for2009,and62.4%for2008(StatisticsSA,2008,2009,2010).ThediscrepancyinthesefigureshighlightsthepossibilityofahighnumberofpeopleoutsidethetaxnetandthereforetheneedforSARStobringtheseindividualsintothetaxnetandwidenSouthAfrica’snarrowtaxbase.
Thedistributionoftaxpayers,taxableincomeandtaxpaid–assessedthroughamajortaxableincomegroupanalysis–revealsthatbetween2007and2010themajorityoftheassessedindividualtaxpayers,thatistosay47.9%in2010,fellwithintheR120001–R400000incomegroup.In2010,5.7%ofassessedindividualtaxpayersfellwithintheR0incomebracket,and8.8%fellintheR400001–R500001+bracketasshowninFigure3below.
0 1–60000 60001–1200000 1200001–4000000 4000001–5000001+
60
50
40
30
20
10
0
2007 2008 2009 2010
TaxableIncomeGroups
Perc
enta
ges
Figure3:distributionoftaxpayers,(individuals’percentage)2007–2010
Source: National Treasury, 2011 Statistics
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However,52.6%ofthetaxcollectedin2010wascontributedby47.9%ofthepeopleassessedbySARSwhofallintheR120001–R400000bracket,and36%ofcollectedtaxin2010wasobtainedfromindividualsfallingintheR400001–R500000+bracketandtogetherthesetwogroupsmakeup8.8%ofoveralltaxableindividuals.Figure4belowshowthetaxcollectedinpercentagesfortheyears2007to2010.
0 1–60000 60001–1200000 1200001–4000000 4000001–5000001+
60
50
40
30
20
10
0
-10
2007 2008 2009 2010
TaxableIncomeGroups
Perc
enta
ges
Figure4:distributionoftaxpayersoverselectedtaxableincome2007–2010
Source: National Treasury, 2011 Statistics
Theaboveanalysisshowthattherearegenerallyfewindividualtaxpayerswithinthehighesttaxableincomegroup(R400001–R500001)buttheybringinasubstantialamountoftaxableincomecomparedwiththeothergroups.Thisimpliesthattheirtaxrateishigherthanthatoftheothergroupsandthereforetheybearalargershareofthetotaltaxburdencomparedtotheotherincomegroups.Thealternativethesiswouldbethatthisgrouphasasubstantiallyhigherincomepercapita.
3.3.2companyincometax(cit)
AccordingtotheinternationalCorporateTaxRatesforSouthAfricafrom2008to2012,theCITwasreducedfrom29%in2008to28%in2009,andhasbeenmaintainedatthatleveluptonow.However,certainsectorsoftheeconomyhavedifferenteffectivetaxratesduetospecifictaxdispensationsanddeductions.Examplesarethegoldminingformula,farmingdeductionsandvaluation,andaccelerateddepreciationofcapitalforqualifyingsectors.SmallbusinesscorporationswithaturnoverofnotmorethanR14millioncanapplyforaspecialtaxdispensationintheformofagraduatedincometaxratetableasopposedtohavingafixedrate.MicrobusinesseswithanannualturnoveroflessthanR1millionmayalsoelecttoonlypayturnovertax.AspartofCIT,companiesmayalsohavetopayCapitalGainsTax(CGT)ondisposalofassets.Secondarytaxoncompanies(STC)hasbeenpayableatarateof15%ondividendswhendeclared,thoughSTChasbeenreplacedbyadividendswithholdingtaxasof1April2012.
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However,therewasachangeinprovisionaltaxpatternsaftertheintroductionofthe80%ruleinJanuary2009throughRevenueLawsSecondAmendmentAct,2008.Thisrule,whichwasimplementedforcompanieswithyear-endsafter1March2009,requirestaxpayerswithtaxableincomeinexcessofR1milliontosettleatleast80%oftheirtaxliabilitybythetimetheymaketheirsecondprovisionalpaymentorincursignificantpenalties.Asaresult,the2009/10fiscalyearsawasignificantdeclineinthirdpayments(fromR27.3billionin2008/09toR9.5billionin2010/11)whilefirstandsecondprovisionalpaymentsincreasedrelativetothetotalprovisionaltaxforeachyear(NationalTreasury,2011).
AccordingtotheSouthAfricanRevenueServicesregister,over2millioncompanieshavebeenregisteredwithSARSbetweenthe2007and2010taxyears,andofthesecompaniesover1.6millionareactiveandpaytheirtaxes.Taxbasebroadeningthrougheducation,outreachandenforcementinitiativeshaveresultedina10.6%increaseinthenumberofcompaniesregisteredsince2009.
3.3.3companyincometaxbysector
In2007,thefinancing,insurance,realestateandbusinessservicessectorwasthelargestsector,witha28%shareofthetaxassessed.Itwasfollowedbyminingandquarrying(10%,)transport,storageandcommunication(8%),long-terminsurance(7%),retailtrade(6%),coalandpetroleumproducts(5%),metal(includingmetalproducts)(5%),wholesaletrade(4%),vehicles,partsandaccessories(4%)andfood,drinkandtobacco(3%)asshowninFigure5below(NationalTreasury,2011).
Figure5:taxassessedbysector(allcompanies),2007
Mining&Quarrying(10%)
Transport,Storage&Communication(8%)
WholesaleTrade(4%)
RetailTrade(6%)
Other(20%)
Coal&PetroleumProducts(5%)
Metal(includingmetalproducts)(5%)
Food,Drink&Tobacco(3%)
LongtermInsurance(7%)
Financing,Insurance,RealEstate&Business
Services(29%)
Vehicles,Parts&Accessories(4%)
Source: National Treasury, 2011 Statistics
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Thepicturechangedslightlyin2010;thefinancing,insurance,realestateandbusinessservicessectormaintaineditsdominanceasthelargestsector,witha27%shareoftaxassessed.Itwasfollowedbytransport,storageandcommunication(12%),retailtrade(9%),coalandpetroleumproducts(5%),wholesaletrade(5%),food,drinkandtobacco(4%),miningandquarrying(4%),metal(includingmetalproducts)(3%)andvehicles,partsandaccessories(2%),long-terminsurance(1%),asshowninFigure6below(NationalTreasury,2011).
Figure6:taxassessedbysector(allcompanies),2010
Mining&Quarrying(4%)
WholesaleTrade(5%)
RetailTrade(9%)
Other(28%)
Coal&PetroleumProducts(5%)
Metal(includingmetalproducts)(3%)
Food,Drink&Tobacco(4%)
LongtermInsurance(2%)
Financing,Insurance,RealEstate&Business
Services(27%)
Vehicles,Parts&Accessories(2%)
Transport,Storage&Communication(12%)
Source: National Treasury, 2011 Statistics
Theanalysisshowsthatthefinancialsector,consistingofinsurance,realestateandbusinessservices,iscontributingmoretotheCITandisthereforebearingagreatertaxburdenthantheothersectors.
3.3.4valueaddedtax(vat)
InSeptember1991,SouthAfricareplaceditsGeneralSalesTax(GST)withaconsumption-typeValueAddedTax(VAT).Theoriginalstatutoryratewas10%,whichwassubsequentlyraisedto14%in1993.TheSouthAfricaVATisleviedonthedomesticsupplyandimportsofgoodsandservices,whileexportedgoods(suchasgold)andservicesarezero-rated.Witharebateforintermediatesandinvestmentpurchases,theVATisgenerallyseenasaconsumptiontaxastheconsumerpaysitatthefinalstageofproduction.TheadvantageofaVATisthat,unlikeotherindirecttaxes,iteliminatesthecascadingeffectsoftaxesonintermediateinputsand,assuch,itremovesdistortionsaffectinginputchoicesinproduction(Kearneyetal.,2005).
Asupplierofzero-ratedsuppliesisnotrequiredtochargeoutputtaxonthesesuppliesbutisneverthelessentitledtoadeductionofinputtaxpaidongoodsorservicesacquiredforthepurposeofmakingthem.Thereisawiderangeofbasicfooditemsaswellaspetrol,dieselandilluminatingparaffinthatarezero-rated.Exportsarealsozero-rated.Exempt
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suppliesareexcludedfromVAT–anexampleofsuppliesthatareexemptfromVATisrentalofresidentialproperty.Unlikeeitherstandard-ratedorzero-ratedsupplies,exemptsuppliesarenottaxableactivities,soasupplierofexemptgoodsorservicesisnotallowedtoclaiminputVATinrelationtotheinputsideofthosesupplies(NationalTreasury,2011).
ThelargestnumberofVATvendorsfor2010/11wereinthefinancing,insurance,realestateandbusinessservicessector(33.8%)followedbytheagriculture,forestryandfishing(13.3%)andretailtrade(9.8%)sectors.Companiesinthefinancing,insurance,realestateandbusinessservicessectormadethelargestproportionofgrossdomesticVATpaymentstotallingR66billion(32.1%)in2010/11.Thecompaniesintheminingandquarryingsectorat0.5%and3.2%ofthetotalgrossVATpaymentsfor2010/11werenegativecontributorstonetVAT.
ThenumberofvendorsregisteredforVATpurposeshasbeendecliningsince2007/08.Thishasbeenduetotheadditionalregistrationandlegislativerequirementsaswellasaclean-upoftheVATregister.Avendorisregardedasactiveifapaymentwasreceivedorarefundwasmadetothevendorduringthefiscalyear.
4.0 HiGHnetwortHindividuals(Hnwis)
SARSdefinesHNWIsasthoseindividualsearningmorethanR7millionperannum,oralternativelythosewhohaveassetsofmorethanR75million.AcollaborativeinvestigationbetweenbanksandSARShasrevealedthatthereisasignificantnumberofHNWIswhoareunder-declaringtheirincome,resultinginsignificantrevenuelosses.Accordingtothisanalysistherearebetween10000and20000individualsinthecountrythatmeetthehighnetworththreshold.Onlybetween2000and3000oftheseindividualshavedeclaredthisincometoSARS(SARS,2012a).
SARS’sowninvestigationhasidentifiedapproximately9300individualswhomeetthecriteriasetofHighNetWorthIndividualsbutarenotregisteredandcompliantasHNWIs.About2300oftheseindividualsareonSARS’sregisterbutarenottaxcompliantwhile7000areunregistered(Vanek,2012).Only360HNWIsareregisteredwithSARSandarecompliant.ThisiscostingthefiscusanestimatedR48billioninpotentialrevenue.SARShasdocumentedsomeglaringanomaliesinthefinancialaffairsofnon-compliantHNWIs–suchas50individualswhoownluxuryprivateplanesthatarevaluedatoverR20million,butwhohavedeclaredgrossincomeoflessthanR1millionintheirtaxreturns.Over1100individualshavebeenidentifiedwhoownpropertyinexcessofR30millioninvalue,themajorityofwhomappeartoearnverymodestincomesthatarenotreconcilablewithassetsregisteredintheirnames.SomeindividualsidentifiedownluxurycarsincludingLamborghinisandFerrariseventhoughtheyclaimtohavegrossincomeoflessthanR350000.
ThemaintaxinstrumentthatappliestoHNWIsistheCapitalGainsTax(CGT),whichhasincreasedtoR9.061billionin2010/11fromR3.661billionin2007/08oftotalCGTraised.However,CGTpaidbyindividualswentuptoR2.012billionfromR1.167billionoverthesameperiod.ThisraisesthetopeffectiveCapitalGainsTaxrateby32%(from10%to13.2%)ofanycapitalgainforHNWIs.
ThereisagreatneedforSARStoproperlycapturetheseindividualsinordertoadequatelytaxthemandraisemorefundsfordevelopmentalinitiativesandprovisionofessentialservices.
sectoranalysis
1.0mininGsector
1.1overviewandimportanceofthesectorintheeconomy
SouthAfricaisacountrywithsubstantialmineralresources.Itistheworld’slargestproducerofplatinumgroupmetals,chromeore,manganeseandvanadiumandamajorsupplierofgold,ironore,nickelanduranium.Mostoftheworld’slargestminingcompaniesareeitherSouthAfricanorhavetheiroriginsinSouthAfrica.Theyincludeamongothers:DeBeers,AngloAmerican,AngloPlatinumandAngloGoldAshanti.
Accordingtothe2011ChamberofMinesannualreport,theminingsectorinthecountrycontributes19%toGDP(and8.6%directly),directlyemploys500000people,anditsmineralresourcesvaluedatUS$2.5trillionmakeittheworldlargestminingindustry.Approximately60%ofthecountry’sexportrevenueisattributabletomining,mineralproductionandsecondarybeneficiatedproducts(NationalPlanningCommission,2011).SouthAfrica’sminingindustryin2008rankedfifthintheworldintermsofthecontributionofminingtoGDP(Baxter,2011).
Theminingsectorisalsolinkedtoothersectorsintheeconomythroughexternalitiestoaclusterofindustriesthateithersupplyitoruseminingoutputs.Thisclusterofindustriesincludes:energy,financialservices,waterservices,engineeringservices,specialistseismic,geologicalandmetallurgicalservices,powergeneration,thechemicalssector,thesteelmanufacturingsectorandtheconstructionsector.
TheChamberestimatesthatanotherR200billioninsalesvalueand150000jobsarefromthedownstreambeneficiationsectorsinSouthAfrica.Allofthecountry’sgoldandPlatinumGroupMetalsarerefinedlocallyandmorethan50%ofthediamondsbyvaluearesoldlocallyintothedownstreamdiamondcuttingandpolishingindustry.
WhileminingremainscrucialtotheSouthAfricaneconomy,thepaceofmineralexploitationhasfallenovertheyearsandthemineralbasehasdepleted.ThevalueaddedtoGDPbytheminingsectorremainedflatdespitethehistoriccommoditiesboomexperiencedbetween2001and2008(NationalTreasury,2011b).Mineproductionfellby12.7%yearonyearinOctober2011(StatisticsSouthAfrica,2011b).
AccordingtoCanada’sFraserInstitute,SouthAfricaisonadownwardspiralonthepolicypotentialindex.Usingtherankingofattractivenessofminingdestinationstoinvestorsasayardstick,SouthAfricawasranked28outof47jurisdictionsin2002/03butfelltoposition67outof79jurisdictionsin2010/11(McMahon&Cervantes,2011).Itisafallthatrepresentsasteepdeclineinthecountry’sstandingasaninvestmentdestination.AccordingtoErnst&Young,therehassimilarlybeenamarkeddeclineinthenumberofSouthAfricanminingandmetalstransactionsoverthelastdecade,withdealvaluesfallingfromUS$13billionin2001toUS$2.9billionin2010(Ernst&Young,2011).
1.2sectorspecifictaxregimeissues
Miningcompaniespaythenormal28%CorporateIncomeTax.However,asexplainedbelow,goldanduraniumcompaniesaretreateddifferently.Capitalexpendituresrelatedtominingareexemptedfromtaxintheyearinwhichtheyoccurred.Asaresultofringfencingintheminingsector,onlytheincomefromthemineatwhichtheapplicablecapitalexpenditureswereincurred,istaxexempt.Inadditiontonormaltax,companiesarealso
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liableforWithholdingTaxonDividends(WTD)toamaximumof15%onnetdividendsdistributedasof1April2012.TheeffectivetaxrateforcompaniesisthereforeacombinationofnormaltaxandWTDandisvariabledependingontheamountofthedividenddeclared.CapitalGainsTaxisalsoapplicableataneffectiverateof14%(FIAS,2006).Thenewdividendwithholdingtaxalsoqualifiesfortreatyrelief.
Goldindustrytaxation
Thegoldminingformulaappliesahighmarginaltaxratetothetaxableincomeofmines,thoughthecapitalexemptioncankeeptaxableincomelow.ForacompanyelectingtheSTCexemption,themarginaltaxrateis45%oneveryrandofprofitinexcessofthe5%tunnelprotection.
Thetaxongoldminingishighlyprogressivebecauserelativelyunprofitableminespayalowaveragetaxratewhilemoreprofitableminespayamuchhigheraveragetaxrate.Thecapitalexpenditureexemptionfurtherexacerbatesthisbecauseminesinearlystagesofdevelopmentnormallyfacehighercapitalexpendituresandthereforehavelesstaxableincomewhilematureminesnormallyfacelowcapitalexpendituresandthushavehighertaxableincome.
Thegoldformula2wasinitiallyintendedtotacklethiseffect.Generouscapitalexemptionsandasteeplyprogressiveburdenwereaimedatencouraginggoldminesnearingtheendoftheirlifecycletoundertakenewinvestmentsindeepershafts.Whilethecostsofproductionfortheseinvestmentsareveryhigh,thegoldformulawasaimedatreducingthetaxburdenforsuchexpansions.Thejuryisstilloutonwhethertheformulahassucceededinthisendeavour.However,worthnotingisthatgoldproductionhasdeclinedandthegoldindustry’sprincipalinputshaveincreasedfasterthanbasicinflation.Theoverallgoldproductioncoststructure,excludingcapitalexpenditure,hasdramaticallyincreasedcomparedtotheprices.Thusprofitabilityhassuffered(FIAS,2006).
vat
Exportsarezerorated.TheminingindustrythereforedoesnotpayanyVATandminingcompaniesarealsoentitledtoclaimarefundforalltheirinputtaxesbecausemostmineralproductionisexported.
1.3analysisofthetaxregime
effectivetaxrate
Accordingtothe2006Sector Study of the Effective Tax Burden of South AfricabytheForeignInvestmentAdvisoryService(FIAS),theMarginalEffectiveTaxRate(METR)oncapitalfortheminingsectoris0.4%(FIAS2006).ThestudystatesthatthelowerMETRisaresultofgeneroustaxtreatmentfortheminingsector.Forinstance,thegoldformulalowerstheoverallCITrate.ThelowerMETRwasalsoasaresultofminingcompaniesbeingabletowriteoffallmachineryandequipmentaswellasminedevelopmentexpenditures.TheMETRonequipmentfortheminingsectorisnegative32%becauseofthisimmediatewrite-offprovision.Thissuggeststhatthereisasubstantialsubsidytoinvestmentinequipmentintheminingsector.
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(2) GoldminingTax=45–225/xonallminingincome,and37%onnon-miningincome,wherexistheratioof
operatingprofittototalrevenue,whichimpliesamarginaltaxrateof45%forcompanieselectingtheSTC
exemption.ForcompaniesnotelectingtheSTCexemption,theformulawas:Tax=35–175/xonallminingincome,
and29%onnon-miningincome,whichimpliesamarginaltaxrateof35%.
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resourcesrenttax
In2011theNationalWorkingCommitteeoftheAfricanNationalCongress(ANC),thegoverningpoliticalpartyinSouthAfrica,appointedaresearchteamtoinvestigateandreportbackonthefeasibilityofminenationalisationinSouthAfrica.Thethree-personresearchteamhasconductedadetailedinquiry,involvingextensivecasestudiesofBotswana,Brazil,Chile,China,Finland,Malaysia,Nigeria,Norway,Sweden,Venezuela,ZambiaandZimbabwe.
Thereporthasrecommendedthatsomeformofwindfallprofitstaxbeintroduced,modelledonAustralia’sresourcesrenttaxfortheminingindustry;andthatrestrictionsbeplacedontheexportofunprocessedminerals(whichwillbesubjecttoexportduties)toencouragedomesticbeneficiationandasubstantiallyincreasedroleforthestateminingcompany,possiblymodelledonCodelco,theChileanstate-ownedcopperproducer.
Thereissomescopeformobilisingmoredomesticresourcesinthissectorthroughanupwardrevisionofthetaxrateandgradualremovaloftaxincentives.
2.0 Financialsector
2.1overviewandimportanceofthesectorintheeconomy
Thefinancialsectorcertainlyplaysacriticalroleintherealisationofthedevelopmentalaspirationsofanycountry,includingSouthAfrica.Thesectoractsasacatalystforeconomicgrowthandemploymentcreation,andensuressustainableeconomicdevelopmentforthecountryanditspeople.Itprovidesaplatformforordinarycitizenstotransactandexchangepaymentsforgoodsandservices.Throughitsimportantintermediaryrole,thefinancialservicessectortouchesthelivesofordinarypeoplearoundtheglobe.
TheSouthAfricanfinancialsectorcomprisesoverR6trillioninassets,contributing10.5%oftheGrossDomesticProductoftheeconomyannually.Itemploysaboveaquarterofamillionpeople,translatingtoabout4%oftotalformalemploymentandcontributingatleast15%ofCorporateIncomeTax.Since2000,thesectorhasgrownatanannualrateof9.1%,comparedtobroadereconomicgrowthrateof3.6%.Growthinemploymenthasalsobeenverystrong:overthesameperiod,thenumberofpeopleemployedinthesub-sectorincreasedby24.5%andthefinancialsectorhasbecomeoneofthefastest-growingemployersinSouthAfrica.Thetotalassetsofthesectorhavealsogrownsignificantly,registeringnominalcompoundaveragegrowthof12.3%between2000and2010.Financialsectorassetsnowstandat252%ofGDP(NationalTreasury,2011a).
SouthAfrica’sfinancialsectorisbackedbyasoundregulatoryandlegalframework,andincludesdozensofdomesticandforeigninstitutionsprovidingafullrangeofservicesfromcommercial,retailandmerchantbanking,mortgagelending,insuranceandinvestmentservices.
FinancialservicesareexemptedfromVAT.Thesectorissubjectedtostandardtaxtreatmentwithnoparticularsector-specificincentives.Instead,extremelycomplex,innovativeandevolvingproductsandservicescharacterisethefinancialsector.
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vat
InterestincomeearnedbyfinancialinstitutionsisVAT-exempt.Sinceinterestconstitutesahighportionofincome,especiallyforcommercialandretailbanks,onlyasmallportionoftheVATpaidbybanksisrecoverable.SARSappliesaVATrecoveryformulatomostfinancialinstitutions,basedonfeeincomedividedbytotalincome.Formostbanks,thisworksouttoabout10%oftotalVATpaidasrecoverable.Thiscreatesanincentivetoconvertasmuchoftheirincomeaspossiblefromexemptforms(mainlynetinterestmarginandtradingprofits)intofees,toincreasetheirVATrecoverypercentage,whichinturnmaypartlyexplainthehighcommercialbankchargesinSouthAfrica(NationalTreasury,2011a).
Withsomeexceptions,mostoftheactivitiesofbankinginstitutions,animportantpartofthefinancialsector,areexemptfromVAT.ThismeansthatbanksdonotchargeVATnoraretheyabletoclaiminputcreditsfortheVATpaidonmuchoftheirinputs.Thus,likenon-registeredSmallBusinessCorporations(SBCs),bankscanbearaheavyeffective‘salestax’typeburdenontheirinputs.
WithanoverallweightedaverageMETRoncapitalofjustunder30%,thefinancialsectorbearsoneofthehighestmarginaltaxburdensoncapitalofanyofthesectorsstudied.ThisisbecausethesectorisnotthebeneficiaryofanyspecialincentivesintermsofthestatutoryCITrateorallowancesforitscapitalexpenditures,andbecauseoftheexemptionfromVAT.InformationfromSARSsuggeststhatabout25%oftheturnoverofallfinancialinstitutionsistaxexempt.TheresultingindirecttaxonbankinputsiswhatgeneratesthehighMETRoncapitalequipmentinthefinancialsector(NationalTreasury,2011a).
Oneshouldnote,however,thatwhiletheMETRcalculationssuggestahighcapitaltaxburdenonthefinancialsector,therearemanysubtletiesofthetaxsystemasitrelatestothissectorthatcannotbecapturedbytheMETRmethodology.Inparticular,structuredfinancingandtheabilityoffinancialinstitutionstoeasilymovemoney,andbookloans,betweenjurisdictionsisawellknownprobleminthissector.
theFinancialtransactiontax(Ftt)
Thisisanenvisagedtaxtobeleviedonpeopleorbusinessesthatbuyorsellashareofstock,abond,afuturescontract,anoptionscontract,oranyofthecommonlytradedfinancialinstruments.
Thepotentialrevenuesfromthistaxarehuge;recentreportssuggestabroad-based,low-rateFTT(0.01%–0.05%)couldgeneraterevenuesofnearly€200billionannuallyintheEUand€480billiongloballyforimmediateeconomicneedsandfurthereasetheeffectsofgovernmentbudgetcuts.FTTswouldalsomakespeculativetradingandspeculativearbitragelessattractivebyincreasingtradingcosts.FTTscouldraiseevenmorerevenueifcombinedwithcomplementarytaxessuchastheInternationalMonetaryFund’s(IMF)proposedFinancialActivitiesTax(FAT),whichwouldcompensatefortheVATexemptionsthatbenefitfinancialservices.
EventhoughSouthAfricawasreportedtobeinsupportofthistax,therehasbeennoofficialstatementfromeithertheNationalTreasuryorthePresidencyonfunctionalityandimplementationdetails(Hazelhurst,2011)3.
(3) RobinHoodTaxGlobalWeekofActionavailableathttp://www.makefinancework.org/IMG/pdf/gwoa_campaign_
tool-kit_eng.pdf
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Financialtransactionsinflows
CapitalinflowsarecrucialtotheSouthAfricaneconomybecausetheycontributetothefinancingofthecurrentaccountdeficit.However,theycantriggerabruptcurrencyvolatilitythatmaycauselastingdamagetotheeconomy.Thereisthereforeaneedtoslowdownthecapitalinflowintotheeconomy,particularlythatof‘hotmoney’asthishasthepotentialtobringaboutfinancialinstability.
ThereisanopportunityforSARStobetterunderstandthesectorinordertotaxitproperlyandraisefundsfordevelopmentalpurposes.
3.0automobilesector
3.1overviewandimportanceofthesectorintheeconomy
TheautomotiveindustryistheleadingmanufacturingsectorintheSouthAfricaneconomy.ItisthethirdlargestcontributortonationalGDPaftertheminingandfinancialsectors.AccordingtotheAutomotiveExportManualfor2011,theindustrycontributed6.17%to2010GDP;andonaveragefromtheyear2000,theindustrycontributiontothecountry’sGDPhasbeen6.9%.Thetotalemploymentinthesectorwasestimatedat130000peopleinthemanufacturingofaccessories,componentsandvehicles,translatingtoabout5.9%oftotalmanufacturingemploymentwhilsttheretailsegmentemploysabout200000people(Werbeloff,2011).MostofthemajorglobalvehiclebrandmanufacturersarerepresentedinSouthAfrica.TheseincludeToyota,BMW,Volkswagen,Mercedes-Benz,Nissan,GeneralMotorsandFord.Manyofthemodelsproducedareforboththedomesticandexportmarkets.
TheSouthAfricaautomobileindustryaccountedfor0.61%oftotalproductionofvehiclemanufacturingworldwidein2010andwasranked24thforvehicleproductionintermsofglobalmarketshare.Itsmainexportdestinationsincreasedfrom62in1995to131in2010.Ithasalsofosteredtradeandbusinesspartnershipswiththeessentialtradingblocs,suchastheEU,NAFTAandMercosur.SouthAfrica’smainautomotivetradingpartners,intermsofaddedexportsandimports,areadvancedeconomies.In2010,SouthAfrica’sautomobiletradewithGermanystoodat43%oftotaltrade,Japan19%,andtheUSA18%(Alfaroetal,2012).
TheSouthAfricanautomotivesupplychainencompassesmanufacturing,distribution,andmaintenanceandservicing.Domesticandinternationalfirmssupplyinputsforthemanufacturingprocess.Thevaluechainbeginsbyutilizingbasicmaterialsproducedthroughindustriessuchasminingandlivestock.Theseinitialsuppliersthenprovideinputstootherlayersofsuppliers,whointurnprovidethenecessarymanufacturedinputsforfinalvehicleassembly.Thesubsequentstagesofretailanddistributionaresupportedbydealerships,marketing,financialservices,vehiclemaintenance,transportationandlogisticsproviders.Theautoassemblersareatthecentreoftheindustryandrelyheavilyonthesupportfromsuppliers,manufacturers,andaftermarketindustries.Inaddition,theclusterissupportedbyGovernmentagencies,researchanddevelopmentcentres,andawiderangeofInstitutionsforCollaboration(IFC)(Alfaroetal,2012).
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3.2sectorspecifictaxregimeissues
TheindustryissubjectedtothestandardCorporateIncomeTax.VehiclesmanufacturedarealsoliableforCarbonDioxideemissiontaxesasagovernmentefforttoreducetheemissionofgreenhousegases,ofwhichcarbondioxideisthemajorcontributortoglobalwarming.ThecarbondioxidetaxemissiononpassengervehiclesisR75pergramCO2emissioninexcessof120g/kmandondoublecabsisR100pergraminexcessof175g/km.
TheautomobileindustryreceivessignificantgovernmentsupportthroughasetofincentivesknownastheMotorIndustryDevelopmentProgramme(MIDP).TheMIDPcameintoeffectin1995toassistanindustrythatwasself-sufficientasaresultofextremelyhighimportdutiesandlocalcontentrequirements.
TheoriginalgoaloftheMIDPprogramwastohelptheautomotiveindustryinSouthAfricaadjusttotradeliberalisationandbecomeinternationallycompetitive.Theprogramwasconfinedtoexportfacilitation,whichentailedareductionoftariffs,aremovaloflocalcontentrequirements,duty-freeimportsofcomponentsuptoapercentageofthewholesalevalueofthevehicle,anddutyrebatecreditsearnedonexports.Insimpleterms,thelocalvalue-addedofcomponentsorbuilt-upvehiclesexportedearnscreditsthatcanbeusedtooffsetimportdutiesoncomponentsandvehicles.Thesedutycreditsaretradableandcaneitherbeusedtoimportorsoldtoprovideaseparatesourceofrevenuefortheexporter.
Theprogramwasinitiallyscheduledtorunforfiveyears,butithasbeenextendedthreetimes,andisslatedtoendin2020.ThelatestrevisionhasresultedinanewprogramcalledtheAutomotiveProductionandDevelopmentProgramme(APDP).Itwillsetimporttariffsat25%forbuiltupvehiclesand20%forcomponentsfrom2013.Thelocalassemblyallowancewillenablevehiclemanufacturersproducingmorethan50000vehiclesayeartoimport20%oftheircomponentsdutyfree,andwillreducetariffsto18%(Werbeloff,2011).
AlthoughtheSouthAfricangovernmenthasbeenreducingitssupportinthesubsequentrevisionsoftheMIDP,theincentivesstillremainverysignificant(Black&Mitchell,2002).Importdutiesonvehicleshavefallenfrom65%in1995to40%in2002and30%in2007.Importdutiesoncomponentshavefallenfrom49%to30%andthen25%inthesameyears.Inordertooffsetthereductioninthevalueofincentivesanewfeature,theProductiveAssetAllowance(PAA),wasintroduced,whichineffectsubsidisesinvestmentsinnewfacilitiesforexportproductionratherthandirectlysupportingexportproduction.
Themotorindustryisexceptionallysuccessfulbecauseitisdependentonthegenerousincentiveschemefromthegovernment.Itbasicallyreliesheavilyonbothimportedcapitalandimportedinputs.Bothoftheseattractnominaltariffratesrangingfrom5%–15%.ThemanufacturingsectorfacesanoverallweightedaverageMETRoncapitalof21%.Manufacturingfirmsareabletowriteoffequipmentoverfouryears,at40:20:20:20,ratherthanfiveyearsat20%perannum.Itisnotverylikelythatthisaccelerateddepreciationscheduledrivesanyinvestmentdecision,ordrivesthe5%perannumdepreciationallowanceforindustrialbuildings.
Thissectorisheavilysubsidised.Thegradualremovalofsubsidieswillprovidegovernmentwithadditionalresourcestofundotherdevelopmentalchallenges.
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casestudy–volkswaGensoutHaFrica
volkswagenGroupbackground
TheVolkswagenGroupisoneoftheworld’sleadingautomobilemanufacturersandthelargestcarmakerinEurope.In2011,theGroupincreasedthenumberofvehiclesdeliveredtocustomersto8.265million,reflectinga12.3%shareoftheworldpassengercarmarket.InWesternEurope,over23%ofnewvehiclescomefromtheVolkswagenGroup(VolkswagenAktiengesellschaft,2012b).Thecompanyrecordedimpressivegroupsalesrevenueof€159billionin2011,withaprofitof€15.8billionaftertax(VolkswagenAktiengesellschaft,2012b).
TheGroupismadeupoftenbrandsfromsevenEuropeancountries:Volkswagen,Audi,SEAT,ŠKODA,Bentley,Bugatti,Lamborghini,VolkswagenCommercialVehicles,ScaniaandMAN.Eachbrandhasitsowncharacterandoperatesasanindependententityonthemarket.Theproductspectrumextendsfromlow-consumptionsmallcarstoluxuryclassvehicles.Inthecommercialvehiclesector,theproductofferingrangesfrompick-upstobusesandheavytrucks(VolkswagenAktiengesellschaft,2012b).
TheGroupoperates94productionplantsin18EuropeancountriesandafurthereightcountriesintheAmericas,AsiaandAfrica.Itsellsitsvehiclesin153countries(VolkswagenAktiengesellschaft,2012b).
regionalcomparativeanalysis
TheGrouphastakentheglobalautomobileindustrybystorm.Ithasrecordedanimpressivegrowthinallregions.Figure7belowshowsacomparisonofworldcarmarketandVolkswagenGroupgrowthindeliveriestocustomersfromJanuary2011toJune2012.ThecomparisonrevealsthatVolkswagen’sperformanceoverthisperiodwasstrongerthantherestofthecarmarketinalltheregionscovered.InCentralandEasternEuropethediscrepancywasmorepronouncedwithVolkswagenrecordingagrowthof27.3%whiletherestofthecarmarketmanagedonly10.8%.InNorthAmerica,Volkswagenalsorecordedanimpressive22.1%growthcomparedto13.8%growthintherestofthecarmarket.Thepictureisrelativelythesamefortheotherregions.TheoverallgrowthfortheGroupis8.9%whilefortherestofthecarindustryitis8.5%(VolkswagenAktiengesellschaft,2012a).
ThisimpressiveperformancebyVolkswagenvalidatedthenotionthatthecompanyhasbeenquicklybecomingaleaderintheautomobileindustryinrecentyears.
SouthAmerica
NorthAmerica
WesternEurope
Central&EasternEurope
RestoftheWorld
AsiaPacific
Overall
30
25
20
15
10
5
0
-5
-10
CarMarket VWGroup
Regions
Perc
enta
ges
Figure7:worldcarmarketvsvolkswagenGroupdeliveriestocustomers, January2011–June2012
Source: Volkswagen Group half yearly financial report 2012
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Figure8belowshowsthegrowthinpercentagesofdeliveriesofpassengercarsandlightcommercialvehiclestocustomersbyregion,between2010and2011.Germanyasacountryhasbeenincludedinthegraphbecauseitisaparentcompany.SouthAfricahasbeenincludedbecauseitisthecountryunderreview.
TheanalysisshowsthattheVolkswagenGroupisexperiencingahealthygrowthofdeliveriesofpassengercarsandlightcommercialvehiclestocustomersinalltheregionsandthecountriescoveredwithaworldwidegrowthof14.3%.SouthAfricaexperiencedthehighestgrowthat39.4%.Intermsoftheregions,NorthAmericaexperiencedthehighestgrowthat21.4%,followedbyAsiaPacificat20%,Europeat11.3%andSouthAmericaat5%.GermanyalonerecordedagrowthcomparabletoEurope’sat11.4%(VolkswagenAktiengesellschaft,2012b).
ThegrowthinSouthAfricastandsoutandcanbeexplainedpartlybytheMIDPincentives.ItisworthnotinghoweverthattheVolkswagenGroupperformedwellinotherregionswheretheMIDPincentivesdonotexist.ThismaysuggestthattheGroupwouldperformwellinSouthAfricaevenwithouttheMIDPincentives.However,itisequallyimportanttonotethatinvestmentenvironmentsettingsintheotherregionsareheterogeneouscomparedtothoseinSouthAfrica.ItisthereforepossiblethattheMIDPincentivesactasatrade-offtoothernegativefactorsthatareuniquetoSouthAfrica.
Worldwide
Europe GermanyNorth
AmericaSouth
AmericaSouthAfrica
AsiaPacific
40
35
30
25
20
15
10
5
0
Regions
Perc
enta
ges
Figure8:Growthinpercentagesanddeliveriesofpassengerandlightcommercial vehiclestocustomersbyregion,2010–2011
Source: Volkswagen Group facts and figures navigator 2012
doesthevolkswagenGroupbenefitfrominvestingintaxhavencountries?
GiventhattheGroupreportsitsfinancialsasagroupandnotaggregatedaccordingtoitssubsidiariesitisdifficulttoanswerthisquestion–afundamentaloneforthisstudy.Theissueisfurthercomplicatedbythedefinitionoftheconceptofataxhaven.VariousinternationalinstitutionsincludingtheTaxJusticeNetwork,theOECDandtheIMFhaveattemptedtodefinewhatataxhavenmightbe,withoutmuchsuccess;astheyrealisedthatassoonastheydefinedataxhavengovernmentsandbusinessesquicklychangedtheirbehaviourinanattempttoavoidthelabel.
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TaxResearchUK(theresourcedevelopedbytaxexpertRichardMurphy)has,however,comeupwithaverybroadandcomprehensivedefinitionofataxhaven.Itdefinesataxhavenas:
Alocationthatpromotesfacilitiesprovidingtaxhavencharacteristicssuchas:• Secrecywhetheritbewithregardtobankinginformation,taxdata,financial informationorownershipandmanagementinformationandwhetheritbefrom publicorofficialenquiry;• Lowtaxes,oftenringfenced(evenifbysubterfuge)fromthosechargedtothose residentinthejurisdiction;• Easeofinitialregulatorycompliance(therebeingnolocationwhichdoesnot havesuchregulationnow);• Limitedornoregulatoryfilingrequirede.g.theabsenceoftaxreturnsandother formsofdatasupplytoanyofficialbody;• Thefailuretoenquireastowhereanentityregisteredinthejurisdictionmightbe locatedifnotconsideredresidentwithinit;• Rapidrelocationofactivitiesisallowedatthewhimoftheowneroftheoffshore structuree.g.bytrustrelocationorcompanyredomiciliation;• Flexibletrustarrangementsthatdonotmeetthestandardsrequiredbyonshore jurisdictionsandtheHagueconventionontrusts;• Limitedinformationexchange;• Thepresenceofmajorbanking,accountingandlegalentitiesdisproportionateto anyidentifiablelocalneed;
Thedefinitionfurtherincorporatesthecommitmenttoinnovatetoensurethattheseadvantagesareretaineddespitechangeininternationalregulationandattitudes;significantnotionalflowsoffundsthroughthelocationunjustifiedbyanyapparenteconomicactivityundertakenthere;andtheregisteredownershipofassetsinthelocationinexcessofanyobviousneedinherentinthelocaleconomy.
ThelackofdisaggregatedfinancialinformationforVolkswagenGroupSouthAfricameansthatitisnotpossibletousethisdefinitiontoproperlyascertainwhetherornotthecompanybenefitsfrominvestingintaxhavenlocations.
limitationsoftheanalysisofthecasestudyduetolackoffinancialdata
ThereportingofalltheVolkswagenGroup’sfinancials,includingprofitsandtaxes,inaconsolidatedformatwithoutanydisaggregationforanyofitssubsidiaries,isamajorhandicaptotheanalysisofthiscasestudybecauseitprecludesaproperanalysisofprofitsthataccruetoVolkswagenGroupSouthAfricaandmoreimportantlythetaxesthatthecompanypaystoSARS.AnaccuratequantificationoftheMIDPincentivesisvirtuallyimpossibleintheabsenceofthisvitalfinancialinformation.
Itisworthnotingthattheabilityofstatestomobiliserevenueisseriouslyunderminedbyillicitcapitalflight.AreportpublishedbyForumSyd–agroupofSwedishcivilsocietyorganisationscollaboratingforhumanrightsandglobaljustice–entitledBringing the Billions Back (2011) hasfoundthatonanannualbasishugeunreportedflowsofmoneyareleavingdevelopingcountries,endingupinrichcountriesortaxhavens(Froberg&Waris,2011).
ThereportfurthernotesthatifproperlyreportedthisillicitcapitalflightwouldgenerateatleastUS$160billionperyearintaxrevenuewhichtranslatestomorethanoneandahalftimesthetotalannualaidtothedevelopingworld.Theseareresourcesthatcouldbecrucialinthefightagainstpoverty.
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Perhapsmorestrikingisthat,accordingtothereport,onlyasmallshare,3%to5%,ofillicitcapitalflightstemsfromcorruption.Yetalmosttwothirdsoriginatesfrommultinationalcompaniesevadingtax.Moreover,asapercentageofGDP,capitalflightfromAfricaisgreaterthanfromotherpartsoftheworld.
Itmustalsobenotedthatthisillicitcapitalflightisexacerbatedbyfinancialsecrecyintaxhavensandcorporatesecrecythatallowsmultinationalcompaniestoshiftprofitsoutofdevelopingcountriestotaxhavens.
volkswagenGroupsouthafrica
VolkswagenGroupSouthAfricaisawhollyownedsubsidiaryofVolkswagenAktiengesellschaft(VWAG)inGermany.ItisthelargestGermaninvestmentinSouthAfrica.ItislocatedinUitenhage,anindustrialtownnearPortElizabethintheEasternCapeandemploys6500people(VolkswagenAktiengesellschaft,2012a).
VolkswagenGroupSouthAfricahasachievedgreatsuccesswiththeintroductionoftheCitiChiccoin1995.Apartfromexportingbuilt-upunitstooverseasmarkets,italsoexportsbodyandenginepartsandcatalyticconverterstocountrieslikeArgentina,Spain,BelgiumandGermany.VolkswagenGroupSouthAfricamanufacturesGolf4,Golf5,Golf1andPolomodelsforlocalandexportmarkets(VolkswagenAktiengesellschaft,2012a).
GiventhelackoffinancialinformationonVolkswagenGroupSouthAfrica,thesalesfigureswereanalyzedandusedasaproxyfortheperformanceofthecompanyasdetailedbelow.
salesPerformance
VolkswagenGroupSouthAfricarecordedsignificantgrowthinitsfirstquartersalesfigures–from17007in2010to24861in2011–reflectinganincreaseof46%.
Thecompanycontinuedtoenjoyimpressivesalesasitrecordeda12.5%increaseinthefirstquarterof2012,delivering27958vehiclescomparedwith24861vehiclesinthefirstquarterof2011.Thepositivestartto2012gavethecompanya17.8%marketshareintheSouthAfricantotalcarmarket.PoloVivowasthetopsellingbrandinthepassengercarmarketwith8461units.
VolkswagenGroupSouthAfricaledinthepassengercarmarketwithtotalsalesof8260unitsandmarketshareof23.7%inMay2012.Atotalof34820newpassengercarsweresoldinSouthAfrica,anincreaseof18%whencomparedtosalesinApril2012andagrowthof20.8%againstthesameperiod(April–May)in2011.FromJanuarytoMay2012,themarketimprovedby11.3%againstthesameperiodin2011.TheVolkswagenCommercialVehiclessectorreportedsalesof575unitsofwhich249wereAmarokSingleandDoublecabsinJune2012.SupplyconstraintsinArgentinacontinuetoimpactonthedeliveryoftheAmarokrangeintoSouthAfrica.
ThecompanymaintaineditsleadershippositioninthenewpassengercarmarketinJune2012andreportedtotalsalesof7754unitsandamarketshareof21.6%.
DuringJune2012,anindustrytotalof35918newpassengercarsweresoldinSouthAfrica,anincreaseof3.2%whencomparedtothereportedsalesinMay2012andagrowthof14%whencomparedtothesameperiodin2011.Inthefirsthalfof2012,newpassengercarsalesimprovedby11.8%againstthesameperiodin2011,whilstinthesecondquarterof2012,saleswentupby15.5%comparedtothesecondquarterof2011(VolkswagenAktiengesellschaft,2012a).VolkswagenGroupSouthAfricamaintaineditstoppositioninthenewpassengercarmarketfor2012withtotalsalesof8689units.DuringJuly2012,37844newpassengercarsweresoldinSouthAfrica.Themarketincreasedby5.4%whencomparedtoJune2012,andgrewby18.2%whencomparedtoJuly2011,bringingtheJanuarytoJuly2012markettoalevel9.7%abovethesameperiodfor2011(VolkswagenAktiengesellschaft,2012a).
VolkswagenCommercialVehiclessold720unitsand477oftheseunitswereAmaroksingleanddoublecabmodelsinJuly2012(VolkswagenAktiengesellschaft,2012a).
ItisimportanttonotethattheVolkswagenGroupreportsallitsfinancialincludingprofitsandtaxesinaconsolidatedformatwithoutanydisaggregationforanyofitssubsidiariesincludingVolkswagenGroupSouthAfrica.
BecauseoftheVolkswagenGroup’spracticeofconsolidatedreporting,VolkswagenGroupSouthAfricafinancialswerenotreadilyavailabletoenableaproperanalysisoffinancialperformanceandoftheimpactoftheMIDPincentivesonthefinancesofthecompany.However,theVolkswagenGroupfinancialsandthecomparativeregionalanalysisaboveshowthatthecompanyisdoingwellbothinGermanyandinmostoftheregionsinwhichitisoperating.AhighlevelconclusioncanthereforebereachedthatVolkswagenGroupSouthAfricacancompeteeffectivelyintheworldmarketsevenwithouttheincentivesthatitcurrentlyenjoys.Thishighlightsthepossibilityofusingdomesticresourcescurrentlydirectedtowardsautomobilesectorincentives,forotherdevelopmentalinitiatives.
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conclusionandrecommendations
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Despiteimpressivedevelopmentalstrides,inequality,unemploymentandpovertyremainhighinSouthAfrica.Thereisthereforeaneedtomobilisedomesticresourcesthatwillenablethecountrytofacethesedevelopmentalchallenges.
InSouthAfricajustabout10%ofthepopulation,whichtranslatestoabout5.9millionpeople,paytaxestosupportatotalpopulationofover50millionpeople.Thetaxbaseisthereforeverynarrow.StatisticsSouthAfricahasrecordedapproximatelydoublethiscurrentnumberoftaxpayersasemployedpeopleinSouthAfrica,highlightingthatabouthalfoftheemployedpeoplearepotentiallyoutsidethetaxnet.
ItisrecommendedthatSARSupdateitsregistertotrulyreflectthenumberofpeopleemployedandthusbroadenthetaxbasetomobilisedomesticresourcesforthedevelopmentalchallengesfacingthecountry.
Thereareover2millioncompaniescurrentlyregisteredinthecountrybutjustover1.6millionareactiveandpaytheirtaxes.Thereisthereforeasubstantialnumberofcompaniesthataredormantanddonotpaytaxes.ItisrecommendedthatSARScleanupitscompanyregistertoaccuratelyreflectthenumberofactivecompanieswhoarepayingtaxinordertomobilisemoreresourcesforthedevelopmentofthecountry.Thereisalsotoomuchdependencyonthefinancialsectorforrevenue.ItisthereforerecommendedthatSARSallocatemoreresourcestoinvestigatingwhytheothersectorsarelaggingbehindinpayingtaxesinabidtospreadthetaxnetfairlyacrossallsectors.
TherearetoomanyHighNetWorthIndividuals(HNWI)whoareoutsidethetaxnetinSouthAfrica.ItisrecommendedthatSARScontinuetotracktheseindividualswiththeaimofhavinganaccurateregisterandbringingallofthemintothetaxnettomobilisemoredomesticresourcesforsocio-economicdevelopment.
ItisalsorecommendedthatgovernmenttakedifferentstepsaimedatencouragingvoluntarydisclosuresfromHNWIs–suchasintroducingamnestylawstoeasethepunitiveburdenassociatedwithdisclosureofinformationandtoencouragetherepatriationofresourceskeptabroad,andspeedilyissuingtaxrulingstohelptaxpayersknowwhattaxburdentheyaresubjectto.Taxadministratorsshouldmaintainacooperativeattitudeinengagingwithtaxpayers,whichwouldhelptofacilitatethenegotiationsonwhattaxburdenHNWIsshouldbear.
SARSshould,inpartnershipwiththeinternationalcommunity,instituteinitiativesthatareaimedattrackingthepatternsofspendingfortheseindividualsinadditiontoincreasinginternationalandcross-bordercooperationgearedtowardsendingsecrecyintheirfinancialtransactions.
Regardingtaxevasionandavoidance,itisrecommendedthatthreepolicies,AutomaticTaxInformationExchange,BeneficialOwnershipregistries,andcountry-by-countryreportingformultinationalcompanies,beinvestigatedandinstitutedbySARSaskeymeasurestocurtailtheseactivities.
AutomaticTaxInformationExchangewouldrequireSARStocollectfromfinancialinstitutionsdataonincome,gains,andpropertypaidtonon-residentindividuals,corporations,andtrusts.Thisdatawouldbecollectedandautomaticallyprovidedtothetaxauthoritieswherethenon-residentpersonorentityislocated.Reciprocally,thecompetenttaxauthoritiesofthirdstateswillautomaticallyexchangeinformationontheforeignincomeofresidentsofSouthAfrica.
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Theintentionistocreateaglobalstandardtogreatlylimittheabilityofpeopleandcompaniestoavoidorevadetaxesintheirhomecountrybyhidingfundsinanotherjurisdiction.
ABeneficialOwnershipprovisionwouldhavetwoprongs:actionbySARSandactionbythefinancialinstitutionsinSouthAfrica.ItwouldrequireSARStoensurethatthebeneficialownership,controlandaccountsofcompanies,trustsandfoundationsbereadilyavailableonpublicrecordtofacilitateeffectiveduediligence.Withrespecttothefinancialinstitutions,thisprovisionwouldexplicitlyrequirethattheyidentifytheultimatebeneficialownersorcontrollersofanycompany,trustorfoundationseekingtoopenandoperateanaccount.
Sincetaxavoidanceisfacilitatedbytaxhavenstructurescreatedtoshroudbusinessactivityinsecrecy,country-by-countryreportingwouldrequirethatallmultinationalcompaniesreportsales,profits,andtaxespaidinalljurisdictionsintheirauditedannualreportsandtaxreturns.
TheoverallMarginalEffectiveTaxRatefortheminingsectoriscurrentlyverylow.Itisthereforerecommendedthatthecapitalequipmenttaxincentivesaregraduallyremovedtofreedomesticresourcesfordevelopmentpurposes.
ThefinancialsectorbearsthehighestMarginalEffectiveTaxRateoncapitalofallofthesectorsstudied.Itisrecommended,however,thatSARSembarkonaneducationalendeavourthatwillenablethemtounderstandthefinancialinstrumentsusedinthissectorinordertotaxthesectorproperlyandmobilisemoredomesticresourcesfordevelopment.
TheautomotiveindustryreceivessignificantgovernmentsupportthroughasetofincentivesknownastheMotorIndustryDevelopmentProgramme(MIDP).AlthoughtheSouthAfricangovernmenthasbeenreducingitssupportinthesubsequentrevisionsoftheMIDP,theincentivesstillremainsubstantial.Itisthereforerecommendedthatthetaxincentivesforthissectorbegraduallyeliminatedinordertofreeresourcesforotherdevelopmentalneeds.
ThesalesperformanceofVolkswagenGroupSouthAfricainthecasestudyconductedrevealsthatthecompanyisdoingwell.TakingintoconsiderationtheVolkswagenGroupfinancialsandthecomparativeregionalanalysis,ahighlevelconclusioncanbereachedthatVolkswagenGroupSouthAfricacancompeteeffectivelyintheworldmarketsevenwithouttheincentivesthatitcurrentlyenjoys.ItisthereforerecommendedthatthecurrenttaxincentivesprovidedtotheautomobileindustryinSouthAfricabeinvestigatedfurthertofindoutifincentivesshouldnotbegraduallyremovedtogeneratemoreresourcesforsocialinvestments.
Insum,SouthAfricacontinuestofacechallengesofwidespreadinequalities,highunemploymentandpoverty.Inordertotacklethesechallengesheadon,substantialdomesticresourcesmustbemobilised.ThisanalysishasshownthatthereisgreatpotentialtoraisetheseresourcesthroughimprovedefficienciesinPITandCITforthemining,financialandautomobilesectors.
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title OccasionalPaper1 Fairandequitabletaxation:DomesticResourceMobilisation2012PublisHed February2013byOxfamautHors ThandoNgozoandMusaSimelanetecHnicaleditor ThembinkosiDlaminiProoFreader EvaJacksondesiGn LUMOdesign&illustration(www.lumo.co.za)coPyriGHt Oxfamgivespermissionforexcerptsfromthispapertobephotocopiedorreproducedprovidedthat thesourceisclearlyandproperlyacknowledged.SuggestedcitationNgozo,T.&Simelane,M.(2012) Fairandequitabletaxation:DomesticResourceMobilisation2012,Oxfamdisclaimer Theviewsinthispublicationarethoseoftherespectiveauthorsanddonotnecessarilyrepresentthose ofOxfamoranyfundingagency.contactdetails Oxfam 2ndFloorIkusasaHouse 129FoxStreet, Johannesburg 2107 SouthAfrica Tel:+27(0)112232454 tdlamini@oxfam.org.uk
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