Why EY thinks it's time to start dropping SA’s corporate tax rate

The corporate tax rate in South Africa is a flat rate of 28% for all companies.

Ekow Eghan, Managing Partner - EY's South African Tax practice, is advocating a reduction in the corporate tax rate.

There's actually no real link between tax rate and economic growth. Foreign investors generally think of political stability and access to labour. A favourite corporate tax rate is always a plus. In South Africa, corporate tax has been the third highest revenue generator in terms of taxes for government. A very small fraction of the corporate population actually contributes to corporate income taxes.

Ekow Eghan, Managing Partner - EY's South African Tax practice

Corporate income tax is difficult and costly to collect, compared to say VAT. You have this incredibly difficult tax to collect, with a very small population contributing. There's a view that corporates pay taxes. We know the corporation is a fiction. Ultimately that tax is either borne by the shareholders, the consumer or the employees. We know the shareholders pull the strings, so it's a lot easier for them to pass it to labour or the consumer by hiking up prices. National treasury produces no research in this area, even in developed nations it is tricky to get data.

Ekow Eghan, Managing Partner - EY's South African Tax practice

Ultimately given the small number of contributors to this tax, a reduction actually makes very little difference to the vast majority of companies in SA because the vast majority of them actually record losses or break even so won't have to pay taxes. If we believe the argument that the person who bears the economic burden of corporate tax is labour or the consumers - then it certainly merits the question: why not consider a reduction?

Ekow Eghan, Managing Partner - EY's South African Tax practice

Listen to the full interview below.

Get the 10 most-read articles of the week from Bruce Whitfield’s The Money Show, emailed to you every Friday morning.

Subscribe to our Business Wrap Newsletter


Recommended

by NEWSROOM AI
Read More
A tipping point for video conferencing

A tipping point for video conferencing

A business tool for older generations, a staple for younger ones

No traffic and everyone’s at home… Some short-term insurers offer lower premiums

No traffic and everyone’s at home… Some short-term insurers offer lower premiums

Short-term insurers suddenly carry a massively reduced risk burden, says consumer journalist Wendy Knowler. Getting some back?

What is an 'economic depression'? Are we heading for one? Lessons from history…

What is an 'economic depression'? Are we heading for one? Lessons from history…

The Great Depression started 91 years ago and changed everything. Bruce Whitfield speaks to economic historian Keith Breckenridge.

'Bottom line is that the EFF and Malema want the power to incite crime'

'Bottom line is that the EFF and Malema want the power to incite crime'

Sakeliga group is opposing the EFF's application to have the Riotous Assemblies Act of 1956 declared unconstitutional.

[WATCH] SA teacher in Korea showing pupils how to gumboot dance goes viral

[WATCH] SA teacher in Korea showing pupils how to gumboot dance goes viral

Khabazela shares some of the videos that went viral on Twitter and Facebook.

[WATCH] Genius boys creating wire car with working radio goes viral

[WATCH] Genius boys creating wire car with working radio goes viral

Khabazela shares some of the videos that went viral on Twitter and Facebook.

Popular articles
No traffic and everyone’s at home… Some short-term insurers offer lower premiums

No traffic and everyone’s at home… Some short-term insurers offer lower premiums

Short-term insurers suddenly carry a massively reduced risk burden, says consumer journalist Wendy Knowler. Getting some back?

A tipping point for video conferencing

A tipping point for video conferencing

A business tool for older generations, a staple for younger ones

Total number of positive coronavirus cases rises to 1,380

Total number of positive coronavirus cases rises to 1,380

This is an increase of 27 cases from Tuesday's announcement. Health Minister Zweli Mkhize has tested negative for the virus.

What is an 'economic depression'? Are we heading for one? Lessons from history…

What is an 'economic depression'? Are we heading for one? Lessons from history…

The Great Depression started 91 years ago and changed everything. Bruce Whitfield speaks to economic historian Keith Breckenridge.

Sars collects R1.4tr in taxes – up 5.3% on a year before, despite the recession

Sars collects R1.4tr in taxes – up 5.3% on a year before, despite the recession

Despite the achievement, the country still lost R100 billion in uncollected taxes, says Commissioner Edward Kieswetter.

Struggling to pay a debt? Your options: credit insurance vs debt relief holiday

Struggling to pay a debt? Your options: credit insurance vs debt relief holiday

Personal Finance expert Maya Fischer-French on the pros/cons of dipping into credit insurance vs opting for a debt relief holiday.

Absa launches extensive Covid-19 payment relief programme

Absa launches extensive Covid-19 payment relief programme

Absa is providing payment relief to its retail clients as well as its business banking and wealth customers.

'Gita Ramjee was probably one of the most remarkable women you would have met'

'Gita Ramjee was probably one of the most remarkable women you would have met'

The revered South African HIV scientist passed away at a Durban hospital on Tuesday after COVID-19-related complications.

[LOCKDOWN] Sars outlines measures to cushion the COVID-19 blow

[LOCKDOWN] Sars outlines measures to cushion the COVID-19 blow

Commissioner Edward Kieswetter says they have diverted customers to their online channels and contact centres.

How to communicate with frustrated children during lockdown

How to communicate with frustrated children during lockdown

Fair Practice Mediation Services director advocate Veerash Srikison says communication can breakdown in families during this time.