Weak economy cuts down South African companies paying tax

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Nearly half of companies in South Africa had no taxable income in 2017 while a quarter recorded a taxable loss, the South African Revenue service said on Monday, based on its latest 2017 and 18 data, highlighting the impact of weak economic growth.

The revenue service said based on its 2017 data, 48.3 percent of companies had taxable income equal to zero, 27.4 percent reported an assessed loss, and 24.3 per cent had positive taxable income.

Companies have up to 12 months from the end of their financial cycles to submit tax returns.

“The decline can largely be attributed to sluggish economic growth, structural challenges in some sectors of the economy, low confidence levels and political uncertainty.

“All of these factors play a role in subdued investment activity, resulting in lower profitability for companies,” the revenue service said.

In the revenue service’s 2019 Tax Statistics, which measures revenue collection from 2014 to 2015, to 2018 and 19 fiscal years, revenue collection for the current year ended March reached 1.287 trillion rand (90.25 billion dollars), short of a target of 1.302 trillion rand.

The collector said companies submitting returns had fallen 36.9 percent to just over 2 million for the 2018 and 19 fiscal year, partly due to many being considered “inactive or dormant”, while only 63.4 per cent, or 572,000, of companies expected to submit returns had complied.

Tax revenues have fallen sharply in South Africa since 2015 due to weak economic growth and maladministration.

In addition, nationwide electricity blackouts, forcing mines and small businesses to shut down, have put more pressure on the economy and government finances.

In October, the National Treasury said the budget deficit would jump to 5.9 percent of gross domestic product by 2020, its highest since 2009 and 10, and likely reach a 6.5 per cent deficit in 2021, well above government’s target of 4.5 per cent.

Suzan O