South Africa’s tax revenue has grown significantly due to economic growth with the income tax register expanding from three million taxpayers to almost 20 million, said Minister in the Presidency responsible for Planning, Monitoring and Evaluation Jeff Radebe.
“Tax revenue has grown significantly due to economic growth, a broader tax base and more effective revenue collection. The income tax register has been expanded from three million taxpayers in 1996 to almost 20 million in 2013,” said the Minister on Sunday.
Minister Radebe was speaking in Pretoria at the release of South Africa’s 2014 Development Indicators which track progress made in various areas of development.
The South African tax system is broadly accepted as being fair and efficient and forms part of the country’s social compact, raising the revenue necessary to support public services.
According to the data in the report, the number of individuals registered for income tax has increased since 2009/10 due to the new employer filing process and compulsory registration of employees by their employers. Over the period 2010/11 to 2013/14 the number of tax payers registered for income tax increased by seven million.
“Over the past decade, the public finances have supported a large-scale redistributive effort to support national development and reduce poverty. National income, adjusted for inflation, is 50% larger than it was 10 years ago. Over the same period, spending per citizen grew by 80% in real terms, and real expenditure on social services doubled,” explained Minister Radebe.
Since the global financial crisis began in 2008, however, increasing expenditure has been sustained by a large accumulation of debt. Rising debt-service costs threaten the sustainability of social gains achieved over the past decade.
“Government is aware that improving the quality of public spending, combating corruption, and eliminating waste and inefficiency are vital to maintaining the goodwill that sustains revenue collection,” said the Minister.
The past decade has seen the rise of the black middle class. There was a significant shift in the country’s living standards measure between 2001 and 2013. Despite rising average income levels and the rise in the black middle class, levels of inequality have remained high, with the richest 10 percent of households capturing over half of the national income.
Gross Domestic Product grows
GDP growth rate in South Africa averaged 3.7% in the past 10 years while the annual growth rate averaged 1.5% in 2014.
“Our target, embodied in the NDP target is 5.4%. Key risk factors include poor global economic conditions which continue to impact on our export markets. Our mining sector is facing an acute crisis partly as a result of the dramatic drop in commodity prices,” explained the Minister.
Current initiatives to stimulate growth include the government’s infrastructure build programme, the war room on electricity, the Operation Phakisa on the Ocean Economy and on Mining, and the Nine-Point Plan announced in the State of the Nation Address.
Despite fluctuating South Africa’s total investment in fixed capital as a percentage of GDP increased over the last five years reaching 20.3% in 2014. The NDP target is 30% of GDP by 2030.
“This has resulted from the focused delivery on the government’s Strategic Infrastructure Projects, which included the upgrading of roads, schools and hospitals, with the provincial governments and local authorities in particular stepping up their expenditure.”
At the same time, the level of real fixed capital expenditure is mainly reflecting ongoing spending by the electricity and transport sectors. Lower than expected private sector investment as a percentage of GDP remains a challenge to increasing overall investment.
South Africa has not yet recovered to the 2008 level, which was driven largely by preparations for the 2010 Soccer World Cup.
Research and Development
South Africa must increase its investment in research and development (R and D), noted Minister Radebe, adding that although expenditure on research and development as a percentage of GDP has increased over the years, it was only 0.76% of GDP in 2011/12.
“A silver lining in this cloud is that there have been some shifts in the overall composition of gross expenditure on R and D compared to five years ago, primarily as a result off the fact that government has become the largest source of funds for R and D,” explained Minister Radebe. – SAnews.gov.za
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