Africa-Press – South-Africa. Company tax in South Africa is set to shift downward in a big way, according to Stats SA, after the local mining industry more than halved its contributions in Q2 of 2023.
After peaking at R31 billion in Q2 2022, tax from the mining sector has dropped to just R12 billion in Q2 2023, the stats body said. Overall, company tax has dropped to R49 billion in Q2 2023, down from R77 billion in 2021 – although higher than the R32 billion in Q2 2022.
This represents a massive shift in collections from South Africa’s mining sector, says Stats SA, putting a big dent in one of the country’s most important revenue streams.
According to Stats SA, the mining industry strengthened company tax collections after the Covid-19 pandemic – the now famous ‘commodity boom’ which led to the glossy outlook on South Africa’s finances during the 2023 budget.
However, this momentum has waned. While this is a big shocker for the local economy in 2023 – and contributing to a growing budget deficit – the trend for company receipts has been pointing downward for some time, Stats SA said.
Company income tax (CIT) was the third largest source of government tax revenue in 2021/22, according to the South African Revenue Service (SARS).
Personal income tax was the largest contributor (35.5%), followed by value-added tax (25.0%), CIT (20.7%) and other levies and taxes (18.8%).
As SARS points out, although CIT has retained its position as the third-largest source of tax revenue, its contribution has weakened over the years.
In 2008/09, CIT’s contribution was 26.7%. This slowly declined to 15.9% in 2019/20.
After the pandemic, however, CIT surprised on the upside. Its contribution increased to 20.7% in 2021/22. CIT also rose in absolute terms, from a pre-pandemic R214 billion in 2018/19 to R323 billion in 2021/22.
According to SARS, this was mainly due to stronger growth in the mining (supported by commodity price increases), manufacturing and financial sectors.
“The rise in CIT in 2021/22 corresponds with data from Stats SA. The Quarterly financial statistics (QFS) survey collects financial data from enterprises in the formal business sector. It shows that the business services, manufacturing, mining and trade industries are the largest contributors to company tax,” Stats SA said.
Plotting these contributions over time shows the impact that mining had on tax collection in 2020 and 2021. Mining accounted for 25% of total company tax in Q1: 2020, just before the pandemic. Its contribution increased to a high of 50% in Q2: 2021.
The industry recorded the largest increase in taxes paid, from R8 billion in Q1: 2020 to R31 billion in Q2: 2021 (up 277%).
Stronger mineral sales were recorded too – according to data from Stats SA’s Mining: Production and sales statistical release – with sales of platinum group metals driving much of the upward momentum.
Most of the industries covered in the QFS survey registered a rise in company tax over this period. Mining was followed by construction (up 60%), manufacturing (up 59%), and business services (up 28%).
Electricity, gas & water, transport, storage & communication and trade also recorded increases.
As a result, total company tax – as reported by the QFS survey – increased from R32 billion in Q1: 2020 to R62 billion in Q2: 2021. Mining was the largest positive contributor.
The personal services industry was the lone exception, recording a decline of 12%.
Current shift
After its peak in Q2: 2021, CIT from the mining industry lost ground, shrinking from R31 billion to R12 billion in Q2: 2023. The industry’s contribution weakened too, from 50% to 23%.
Overall, company tax continued to rise, from R62 billion in Q2: 2021 to a high of R77 billion later that year. It then declined to R49 billion in Q2: 2023.
Despite the decline, total company tax is still above the R32 billion mark recorded in Q1: 2020.
But mining is not the only problem, Stats SA said.
“Mining may have its moments when commodity cycles peak. Manufacturing, on the other hand, exhibits a different pattern,” it said.
The manufacturing industry’s contribution to total CIT has slowly eroded over time.
After reaching a peak of 37% in Q1: 2015, manufacturing’s contribution weakened, reaching an average of 17% in 2021. In Q2: 2023, its contribution was 20%.
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