Covid hits taxman deep in pocket as tax collection shrinks

When the 2020 budget projections for tax revenue was announced in February 2020, nobody could foresee the massive impact the pandemic would have on tax revenue.

Now it is known how big that impact was. Tax collection was severely affected by the pandemic due to the magnitude of the pandemic shock on economic activity, with tax revenue over the four quarters ending 31 March 202,1 contracting by R105.9 billion or -7.8%, to R1.249 trillion compared to the pre-pandemic level of R1.355
trillion of the previous year.

According to the 2021 Tax Statistics joint publication of Sars and the National Treasury, the severity of the contractions in tax revenue was clear across all the tax types, but more severe regarding domestic taxes and taxes on international trade linked to economic activities that were most affected by lockdown measures.

The total tax revenue Sars collected increased from R1.144 trillion in 2016-17 to R1.249 trillion in 2020-21 and therefore grew at a compound annual growth rate (CAGR) of 2.2%, significantly lower than the CAGR of 9.0% in the previous five-period from 2011-12 to 2016-17.

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The largest sources of tax revenue were still personal income tax at 39.1%, corporate income tax at 16.4% and value-added tax (VAT) at 26.5%, making up 81.9% of total tax revenue collections. The tax-to-GDP ratio moderated from 23.8% in 2019-20 to 22.5% in 2020-21, primarily due to annual reductions in the revenue collected from personal income tax, value-added tax, and domestic specific excise duties.

An analysis of the personal income taxpayers shows that 2 091 559 (40.1%) of assessed taxpayers were registered in Gauteng, with 687 261 living in the Johannesburg metro and taxed on an average taxable income of R481 209.

Other interesting facts about taxpayers are:

• Just more than a quarter, 1 365 098 (26.2%) are between 35 and 44 years old;
• Just more than half, 2 792 845 (53.6%) are male and 2 420 951 (46.4%) female;
• Assessed taxpayers had a combined taxable income of R1.8 trillion and a tax liability of R407.2 billion, with an average tax rate of 22.4% compared to 22.3% in the previous tax year; and
• Income from salaries, wages and other remuneration as well as pension, overtime and annuities, accounted for 91.6% of total taxable income.

– inao@citizen.co.za