SARS could substitute all taxes and earn the same amount of revenue. Here’s how it could work. Image: File/Fotor
Why SARS could substitute all taxes and be better off
SARS could substitute all taxes with this simple-yet-innovative idea adopted in Mauritius. But it chooses not to …
SARS could substitute all taxes and earn the same amount of revenue. Here’s how it could work. Image: File/Fotor
Taking a leaf out of the Mauritian tax book, SARS could substitute all taxes with a 23% flat rate and come out better off. This is the assertion of a Daily Investor article that seeks to understand SARS’ complicated and stifling tax system.
SARS COULD SUBSTITUTE ALL TAXES
Currently, five taxes comprise over 90% of all tax revenue, says the National Treasury. These are:
- Personal income tax.
- Value-added tax (VAT).
- Corporate income tax.
- Customs and excise duties.
- Fuel levies.
Between them all they account for R1.52 trillion of SARS’ R1.69 trillion tax revenue. In contrast, 9.8% of tax revenue (R165 billion) received in 2023 came from 20 different taxes, including the likes of:
- Skills development.
- Transfer duties.
- Plastic bag levy.
- Sugar tax.
- Estate duties.
Long story short, SARS could substitute all taxes with a 23% flat rate and come out better off with a simplified system the eliminates irrelevant and overly complicated money-earning schemes for the state.
TAX AVOIDANCE
Another motivator behind why SARS could substitute all taxes with a flat rate is tax avoidance. As multiple taxes and rates have grown over the years, it’s been in the best interest of high-income taxpayers to hire professionals to help them minimise their tax contribution.
As a result, income tax law has become ever-more complicated in the ongoing battle between SARS and tax practitioners trying to take advantage of various loopholes. Moreover, many small and medium enterprises (SMEs) are stifled from the get-go when it comes to their tax responsibilities. This leads to many rather operating informally, off the books, and making no tax contribution at all.
DO AS THE MAURITIANS DO
In contrast, Mauritius implemented a simple tax system which immediately led to a high compliance rate. Theirs’ is a flat tax rate of 15% on personal income tax, the same as company profits and value-added tax (VAT).
If SARS could substitute all taxes with a 23% flat rate, it will generate the same tax revenue but with significantly less complexity.
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