Africa has highest tax rate of any region

AFRICA still has the highest total tax rate of any region at almost 53%, compared to the world average of 43% and South Africa’s 30%, according to the latest Paying Taxes 2014 report released by the World Bank and professional services firm PwC.
Although Africa’s average total tax rate has fallen by 16 percentage points since 2004 as a result of the replacement of cascading sales tax systems with value added tax systems, the continent’s lack of electronic filing systems contributed most to the difficulty of paying taxes.

South Africa has improved its ranking in the ease of paying taxes for a typical small and medium-sized company from 32nd to 24th, a position it last held in 2011, mainly due to the success of the electronic filing system for individuals and companies and the reduction in the total tax rate.
PwC tax director Charles de Wet said at the African launch of the report in Johannesburg on Tuesday that Paying Tax 2014 provided "unemotional data" about tax systems around the world that acted as one of the drivers of global tax reforms.
He said there had been significant tax reforms since 2004 when PwC and the World Bank released the first report.
The report measures the total tax rate of companies — which are comparable to the case study company in the report — in the 189 participating economies, the time it takes the company to be compliant and the number of tax payments the company has to make.
The case study company has a turnover of about R35m, started operations in 2011 and produces ceramic flowerpots and sells them at retail outlets. It does not participate in foreign trade and has 60 employees, including four managers and 48 workers.
The case study company has a total tax rate of 43%, it takes 268 hours to complete and file its tax returns and makes 26.7 tax payments.
The comparable South African company has a total tax rate of 30.1%, takes 200 hours to complete and file its tax returns and makes seven payments.
Several reforms over the nine years since the first report led to a decline of 9% in the global total tax rate, a decline of 55 hours in the time to be fully complaint and a reduction of seven tax payments.
Kyle Mandy, tax technical partner at PwC, said the decline in profit taxes (that led to the decline in the total tax rate) could be attributed to tax competition between countries. He said in the light of the huge debate about base erosion and profit shifting and the effect on tax collections, it would be interesting to see where the trend went, and whether there would be a reverse or stabilisation.
South Africa ranked 11th in this year’s report in terms of the number of payments compared with 32nd in the 2013 report, mainly due to e-filing. It ranks 80th in terms of the time it takes to comply.
South Africa also compares favourably to members of the Southern African Development Community (Sadc), whose average total tax rate was 37.2% and that of members of the Bric (Brazil, Russia, India and China) countries, whose average total tax rate was 55%.
It takes the comparable company in South Africa 200 hours to comply with its tax obligations, compared with 707 hours for the Bric countries, with Sadc averaging 209.8 hours.
The Africa average is 329 hours.
Mr Mandy said the World Bank and PwC report on paying taxes had been handed to the committee of Judge Dennis Davis, which has been tasked by the finance minister to review the country’s tax system.
The average time to comply in the African region has been consistently above the world average since 2004, and the gap between the two averages has steadily increased over the period. The average time to comply was 342 hours in 2004 compared to the 314 hours in 2012.
The number of payments in Africa has declined "slightly", but it remains the region with the highest number of payments due to the lack of available electronic filing and payments, the low availability of joint payments and the fact that taxes are often levied by more than one level of government.
Governments that have introduced electronic filing include Kenya, Uganda, Madagascar, and Rwanda.