Why SARS could substitute all taxes and be better off

Taking a leaf out of the Mauritian tax book, SARS could substitute all taxes with a 23% flat rate and come out better off. This is the assertion of a Daily Investor article that seeks to understand SARS’ complicated and stifling tax system.

SARS COULD SUBSTITUTE ALL TAXES

Currently, five taxes comprise over 90% of all tax revenue, says the National Treasury. These are:

  • Personal income tax.
  • Value-added tax (VAT).
  • Corporate income tax.
  • Customs and excise duties.
  • Fuel levies.

Between them all they account for R1.52 trillion of SARS’ R1.69 trillion tax revenue. In contrast, 9.8% of tax revenue (R165 billion) received in 2023 came from 20 different taxes, including the likes of:

  • Skills development.
  • Transfer duties.
  • Plastic bag levy.
  • Sugar tax.
  • Estate duties.

Long story short, SARS could substitute all taxes with a 23% flat rate and come out better off with a simplified system the eliminates irrelevant and overly complicated money-earning schemes for the state.

TAX AVOIDANCE

why sars could substitute all taxes and be better off

A lucrative industry of creative tax accountants exists so high-income taxpayers can avoid paying tax. Image: File

Another motivator behind why SARS could substitute all taxes with a flat rate is tax avoidance. As multiple taxes and rates have grown over the years, it’s been in the best interest of high-income taxpayers to hire professionals to help them minimise their tax contribution.

As a result, income tax law has become ever-more complicated in the ongoing battle between SARS and tax practitioners trying to take advantage of various loopholes. Moreover, many small and medium enterprises (SMEs) are stifled from the get-go when it comes to their tax responsibilities. This leads to many rather operating informally, off the books, and making no tax contribution at all.

DO AS THE MAURITIANS DO

why sars could substitute all taxes and be better off

Mauritius remains a favourite destination for South African companies. Image: Canva

In contrast, Mauritius implemented a simple tax system which immediately led to a high compliance rate. Theirs’ is a flat tax rate of 15% on personal income tax, the same as company profits and value-added tax (VAT).

If SARS could substitute all taxes with a 23% flat rate, it will generate the same tax revenue but with significantly less complexity.

NEXT READ: How SASSA pensions compare to the rest of Africa

Do you think SARS could substitute all taxes with a flat rate? Be sure to share your thoughts with our audience in the comments section below. And don’t forget to follow us @TheSANews on X and The South African on Facebook for the latest updates.

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