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why do we pay taxes in south africa

MANY people
feel they work too hard and are frustrated why tax has to be taken out of their
salaries. Well, chartered accountant Refilwe Metenche explains why it is
important for citizens to pay tax. Refilwe
says that tax is a fee that is paid by various persons depending on the type of
service they render, an activity they embark on or product they offer. Working
individuals and corporate companies are examples of people who may be liable to
pay tax. The purpose of tax is to finance government expenditure. One of the
most important uses of taxes is to finance public goods and services, such as
street lighting, street cleaning and road maintenance. She adds that another
important aspect to be noted is that government has various parts to it. For
example, the money you pay in taxes also goes towards paying the salaries of
government workers such as legislators (who make laws), law enforcements like
police and judges, firefighters and so forth. The country would be dysfunctional
and come to a standstill if people were to stop paying taxes. There would be
no funds with which to pay law enforcement agencies or finance the public goods
and services.


The country would be ungovernable. Every year
between July and November, citizens are required by law to file for tax. Filling for your tax for those who earn more than R350 000 a year can be a
daunting exercise. But Refilwe warns against using agencies to file on your
behalf. She says it s rather easier if you visit your South African Revenue
Service (SARS) branch as they deal with this on a daily basis and you won t
have to pay them for helping you. The easiest way to submit a tax return is via
eFiling, for those who have the resources. I would advise them to register for
eFiling, if you have not already done so. There are agents online that are
ready to assist you to complete your return at a click of a button, she says. It is important you take all your supporting documents such as your IRP5 (a tax
certificate) which you get from your employer, proof of your identity, proof of
residence (like a municipal account) and banking details like original bank
statement for a speedy service.


Those that meet a certain criteria must submit
an annual return called the ITR12 return to SARS every tax season. In this
return, an individual has to declare all sources of income in a specific tax
period. The only
way to register to become a taxpayer is to visit a SARS branch where the staff
will register you on the SARS system. You need to take with you the relevant
supporting documentation. Once you ve been registered and given your tax
number, you can then register for eFiling. This is a free and convenient way of
interacting with SARS. From 1 April 2016, SARS has stopped accepting manual
forms of payments. Tax payments are now done electronically or at a SARS
approved bank. Taxpayers can now make
payments at any SARS approved bank, or via electronic funds transfer.
Finance expert Jayson Coomer, known as the, has updated his annual breakdown of South Africa s tax trends, following the mini-budget speech delivered this week. According to Coomer s data, currently a paltry 13% of the South African population of 56 million people are the ones paying income taxes with the other 87% not contributing anything (though still contributing to VAT).


On the basis of personal income tax, the top 1% or so of taxpayers (the 480,000 people earning more than R750,000 per year) pay 61% of the total income tax bill. And I just want to point out that, by almost any standard, this is an extraordinary burden to lay on such a small portion of the population, he said. Income tax payers In terms of revenue sources, personal income tax accounts for 38% of revenue, with value-added tax making up 25%. Companies tax accounts for 18%, followed by the fuel levy (6%), customs (4%), other sources (4%), excise duties (3%) and dividend withholding tax (2%). The biggest portion of the budget goes to the public wage bill (36%) and social grants (17%). One of the criticisms that I often hear is that focusing on income taxpayers is distracting from all the other taxes, Coomer said. From where I sit: company tax and dividend withholding tax are taxes on shareholders who already tend to be income taxpayers. And the VAT and excise duties tend to be split proportionally across incomes, so those are also weighted towards income taxpayers.


Comparing South Africa to the United States, he found that both countries pay taxes that equal about 25% of their annual GDP however, in the USA 47% of people don t pay taxes, compared to 87% in South Africa. In 2010, the top 1% of taxpayers in the US contributed about 37% of the total income tax bill compare that to the 61% mentioned above, he said. Economic growth would help broaden that tax base, but the current anaemic environment means a growing reliance on those 480,000 people, which is not good. Rolling Alpha posts opinions on finance, economics, and sometimes things that are only loosely related. Follow him on TwitterP, and on Facebook atP. P Update: regarding the taxpayer numbers Coomer referred to budget, specifically looking at the 2017/18 projections. There are about 14 million registered individuals. Treasury expects about half of those to be below the income tax threshold, and not pay any income tax. The other half (about 7 million or so) will actually pay tax. Read:P

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