South Africa heading for a tax shock
South Africa is heading for a potential tax shock as its already narrow tax base is concentrated among older individuals and a small group of high-earning taxpayers.
This, while millions of younger citizens remain unemployed or earn too little to make a meaningful contribution to the fiscus.
New data from the South African Revenue Service (SARS) highlighted a growing demographic risk for the country’s public finances.
In the 2024/25 financial year, around 1.7 million taxpayers assessed by SARS were over the age of 55.
Despite accounting for just 22% of assessed personal income tax filers, this group contributed about 27% of total assessed personal taxes.
Collectively, they earned a taxable income of roughly R690 billion and were assessed for R149.5 billion of tax.
This is a notable chunk of the R563.3 billion in personal income tax collected during the year.
In comparison, younger South Africans are contributing far less, not by choice but largely due to limited access to well-paying jobs.
Taxpayers aged between 18 and 34 numbered about 2.3 million in the assessment data, generating a taxable income of R493 billion and contributing just R76 billion in tax.
This is concerning given that people aged 15 to 34 make up more than half of South Africa’s working-age population—about 20.9 million individuals, according to Statistics South Africa.
The imbalance underlines just how concentrated the country’s tax system has become. SARS’s 2025 tax statistics show that only 2.4% of South Africans pay 77% of all personal income tax.
In absolute terms, just over 1.5 million people contribute around R562 billion in personal income tax, effectively carrying the bulk of the country’s revenue burden.
SARS has been one of the most effective institutions in the state, consistently meeting or exceeding revenue targets.
Over the past three decades, total tax collections have grown from R113.8 billion in 1994/95 to R1.9 trillion in 2024/25, representing a compound annual growth rate of 9.8%.
Much of this success has come from improved compliance and efforts to reduce the tax gap, rather than increases in tax rates.
Not sustainable
Personal income tax remains the single largest source of revenue, accounting for 37.4% of total collections, or R729.9 billion.
Income from salaries, wages and other remuneration made up more than 75% of total taxable income in the 2024/25 tax year.
While more than 27 million South Africans are now registered for personal income tax—a figure growing by about 4% a year—the vast majority earn below the tax threshold.
Only 9.1 million are expected to file returns, and only 7.7 million have their taxable income assessed.
Many registered taxpayers, therefore, contribute nothing, leaving the system highly exposed to economic and employment shocks.
According to Professor Daniel Meyer, an economic development specialist and policy analyst at the University of Johannesburg, this situation is becoming increasingly untenable.
“South Africa’s tax base is under severe pressure due to sluggish economic growth, high unemployment and the ongoing emigration of skilled professionals, reducing the number of taxpayers and jeopardising fiscal stability,” he said.
Meyer noted that weak economic growth over more than a decade has limited job creation, with GDP expected to grow by just 1.1% in 2024.
At the same time, emigration is steadily eroding the pool of high earners. More than 32,000 individuals ceased tax residency between 2017 and 2021, including thousands earning over R500,000 a year.
In 2024 alone, an estimated 38,000 taxpayers left the country, resulting in a R3 billion loss in revenue. The BRICS Wealth Report shows South Africa has also lost 20% of its millionaires over the past decade.
On the spending side, pressures are intensifying. Social grant expenditure is rising steadily, increasing from R250.97 billion in 2023/24 to R266.21 billion in 2024/25, while debt-service costs have climbed to R382 billion.
With South Africa’s tax-to-GDP ratio already far higher than the African average, the country’s reliance on a shrinking, ageing taxpayer base is becoming increasingly risky.
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