Learner Support Material

LEARNER SUPPORT MATERIAL

NATIONAL INCOME

The main source of government revenue (income) is taxes.

There are two Tax systems namely Progressive Tax (Taxes on Income) and Regressive Tax (Taxes on Consumption)

1.  Examples of Progressive (Income)Tax are:

1.1 Personal Income Tax is taxes paid on salaries and wages. The

higher the income the higher the percentage tax.

1.2 Company Tax is taxes paid by companies on their profits

1.3 Capital Gains Tax is a tax paid on the profits made by the selling of

assets e.g. houses and vehicles.

2.  Examples of Regressive (Consumption)Tax are:

2.1Value Added Tax (VAT) which is paid on most goods and services at

a rate of 14%. Basic foods such as brown bread, maize, fruit and

vegetables are not taxable.

2.2  Customs duties are taxes paid on imported goods

2.3  Excise Tax are taxes paid on luxury items such as cigarettes and alcohol

3.  Other sources of Revenue (income) include:

3.1 Income generated by the sale of state (government) owned assets

and businesses

3.2 Profits generated by state owned businesses e.g. South African

Airways

3.3 Sale / rental of State owned land or buildings

3.4 Fees such as licensing fees

4. Collection of the Revenue by the South African Revenue Services

The South African Revenue Services (SARS) are administratively autonomous (independent) of the state but within the public (Private) administration. Although South Africa’s tax system is set by the National Treasury, it is managed by SARS.

4. The main functions of SARS are to:

4.1 Collect and administer all National Taxes, duties and levies

4.2 Provide protection against the illegal importation and exportation of

goods

4.3 Facilitate trade by providing Customs services at all major entry and

exit points of our country. The Customs division works to facilitate

trade and make it possible for companies and individuals to trade in an

efficient and legal way. Customs also negotiates and maintains free

trade agreements such as with the European Union and Southern

African Development Community (SADC). You can read the original trade

agreements on the website www.sars.gov.za and follow the “customs and

excise” link

4.4 Advise the Minister of Finance on all revenue matters

5. The difference between a Tax and subsidy

A Tax is a compulsory contribution paid by the citizens of a country to the government e.g. VAT, Income Tax, Rates and Taxes etc. Whereas a subsidy is when the government assists the citizens by paying for or absorbing a portion of the cost of specific goods and services e.g. bread, education and medical services.