South Africa’s tax base is shrinking

A declining number of South African taxpayers will be expected to fork out more as government introduces new initiatives such as the National Health Insurance.

In an analysis for The Conversation, Dr Lee-Ann Steenkamp senior lecturer in taxation at University of Stellenbosch, said that the country currently has a narrow tax base – defined as the number of individuals who were assessed for personal income tax.

While SARS has reported an increase in registered taxpayers over the last few years, the number of taxpayers actually assessed (or taxed) showed a sharp decline, she said.

“In the 2013/14 tax year, a total of 5,991,934 individuals were assessed. This figure dropped to 4,898,565 individuals assessed in 2016/2017. The tax base therefore shrunk by about 18.2% from 2014 to 2017.

“By contrast, the personal income tax burden shouldered by these individual taxpayers has increased,” said Steenkamp.

“This can be expressed as the average personal income tax paid per assessed taxpayer. In the 2013/14 tax year, the tax burden amounted to R45,702.

“This burden expanded to R65,601 in 2016/2017, representing a whopping 43.5% increase from 2014 to 2017.”

Steenkamp said this has led to fewer taxpayers have to carry an increasing burden of tax collections.

“Given the country’s poor economic outlook, credit rating downgrades, high unemployment figures and the myriad of social grants paid to millions of dependent individuals, it is clear that the tax base is already severely strained.”

Tax revolt 

According to new SARS commissioner Edward Kieswetter, South African taxpayers may start withholding their tax payments due to years of corruption.

Kieswetter that this withholding of funds may ultimately lead to an international bailout from an organisation like the IMF.

He said that falling trust in the collector by individuals and companies had led to rising levels of tax avoidance and fraud, bleeding billions from government.

“When public trust wanes, as is the current case, then taxpayers feel morally justified to withhold or manipulate their taxes,” Kieswetter said.

“When revenue collection is undermined it traps us in a vicious cycle of revenue decline, as we’ve experienced, and consequently the need to go with begging bowls to borrow money, which effectively mortgages our future.”


Read: South Africa could be facing a tax revolt – here’s how government plans to get things back on track

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South Africa’s tax base is shrinking