Finance

Extra R21,900 per month ‘tax’ for South Africans who earn over R1 million

Malcolm Libera

 ·23 Jun 2026

South Africans earning R1 million or more are paying over half of their income to the government and other related compulsory charges.

This is despite the fact that these South Africans represent 8% of the tax base but pay over half of all personal income tax (PIT) in the country.

In response to a Parliamentary question, Finance Minister Enoch Godongwana said South Africa has a highly progressive personal income tax system.

He explained that the 2026 Budget Review demonstrated that South Africa’s personal income tax system already is highly progressive.

“The top 13% of individual taxpayers with the highest incomes contribute over 60% of total personal income tax revenue,” he said.

“Almost half of personal income tax is paid by the top 8% of taxpayers with taxable income above R1 million per year.”

Godongwana said that this indicates a narrow personal income tax base, which is dependent on a small number of high-income taxpayers.

However, most taxpayers focus only on Pay-As-You-Earn (PAYE) deductions and overlook the many indirect taxes and compulsory costs that steadily erode their disposable income.

Economists argue that South Africans effectively pay a second layer of costs because many public services fail to meet expectations.

Efficient Group chief economist Dawie Roodt noted that expenses such as school fees, private security and medical aid can be viewed as an additional “tax” on households.

This is because citizens often pay privately for services that should be adequately provided through taxation.

According to CambriLearn, the average cost of a respectable private day school in South Africa averages around R130,000 per year. This works out to at least R10,800 a month.

A mid-tier medical aid, such as Discovery Classic Priority, costs R6,198 per month. This includes unlimited cover at any private hospital and a medical savings account (MSA) funded at 25% of your total contribution.

This also includes a personal health fund for extra day-to-day healthcare expenses and full coverage for approved medicine on the Chronic Disease List (CDL). 

The cost of private security in South Africa varies widely depending on the service level. Standard armed response averages R475 per month.

Housing-related charges further reduce disposable income. Banking guidelines indicate that housing costs should not exceed 30% of gross monthly income.

This means that someone earning R83,333 a month could typically qualify for a home valued at around R2.5 million in the City of Tshwane.

Tshwane provides a R250,000 valuation reduction exemption for residential primary properties. You only pay rates on the remaining R2.25 million value of your home.

After accounting for the municipality’s residential rates rebate, property rates on such a home would amount to roughly R2,198 a month.

Refuse removal for a standard 240L municipal bin costs about R389 monthly, while VAT on R2,000 worth of electricity adds around R261.

Sewerage charges for a typical household using 15 kilolitres of water a month would add another R252 to the bill.

While someone may believe they are paying an effective tax rate of around 41% through PAYE, the reality is far different once other taxes and charges are considered.

There’s more

One of the biggest contributors is VAT, which applies to a wide range of goods and services purchased daily.

South Africans pay VAT on restaurant meals, electricity, clothing, household goods and numerous services. VAT alone is 15%, meaning households are constantly paying additional tax on everyday spending.

Using the example of a household spending around R5,000 a month on groceries, the annual spending of R60,000 would generate roughly R9,000 in VAT payments. 

Additionally, if you’re spending R2,000 a month on fuel, you indirectly pay roughly R7,500 a year in fuel levies.

At the end of it, a person earning R83,333 a month is left with R36,727.69, which translates to an effective tax rate of 56%. Excluding PAYE, this works out to an extra ‘tax’ of R21,947 a month.

This is before we consider investment taxes, transfer duties and estate tax, which helps explain why many South Africans feel significantly poorer than their payslips suggest.

Roodt said it is crucial for South Africa to look after wealthy individuals, as they support the country and its poor citizens.

Roodt said his calculations showed that one family with an income of R1 million pays for approximately 20 poor families to get services from the state.

The taxes from this one family pay for the education, healthcare, grants, housing, and other state services used by the poor families.

This highlights the importance of retaining South Africa’s tax-paying population, many of whom are considering leaving the country.

“A small group of wealthy individuals carries a very heavy tax burden in South Africa. We are completely overtaxing rich people,” Roodt said.

He highlighted that if the state continues to overtax this group, they will react in a way that is detrimental to the country.