South Africa’s tax base shock
South Africa’s tax system is facing an alarming imbalance that economists warn is unsustainable.
The country’s latest Tax Statistics report highlights the severe concentration of the tax burden on a small fraction of the population and corporations.
In the 2023/24 fiscal year, South Africa’s gross tax revenue amounted to R2.2 trillion. Personal income tax (PIT) remained a cornerstone of this revenue, buoyed by modest recoveries in employment and earnings.
However, the broader picture reveals a stark concentration of tax responsibility.
Just 1,660,182 individuals—a mere 2.6% of the country’s 64 million people—contribute 76.2% of all personal income tax.
These individuals reported an aggregate taxable income of R2.3 trillion, resulting in a tax liability of R499.9 billion.
The figures expose the extent to which South Africa’s tax base depends on a small minority.
The situation is equally concerning in the corporate sector. Only 1,051 companies—representing 0.1% of the total—pay 72.3% of all company income tax.
Corporations with taxable incomes exceeding R100 million dominate this group, shouldering an overwhelming majority of the corporate tax burden.
While personal income tax collections showed resilience, company income tax revenues declined sharply in key sectors such as mining, and Value-Added Tax (VAT) growth stagnated as consumer spending faltered under financial strain.
South Africa’s socio-economic challenges compound the pressure on its limited taxpayer base.
Over 30% of the population—approximately 19.2 million people—currently rely on social grants, a figure projected to grow to 19.7 million by 2026/27.
This means that roughly 12% of South Africans who pay income tax are supporting a social safety net for nearly half the population.
Economist Dawie Roodt describes the situation as a looming financial crisis, highlighting the government’s escalating debt burden and unchecked spending as critical threats to economic stability.
“The state owes too much money. We cannot afford to spend like we do,” Roodt warns, stressing the need for urgent fiscal responsibility.
Experts agree that further taxing the already burdened minority of taxpayers could backfire catastrophically.
Wealthy individuals and corporations are increasingly seeking refuge in countries with friendlier tax regimes.
“If this increases, the tax base will collapse as many of the 2.6%, as well as businesses, will simply leave the country—which they are already doing,” Roodt cautions.
Economist Claude de Baissac echoes this sentiment, noting that the country’s heavy reliance on high-income earners is unsustainable.
He points to the growing exodus of not only the wealthy but also the middle class, who are frustrated by paying taxes for services like education and healthcare that they ultimately have to procure privately.
This erosion of the taxpayer base highlights a vicious cycle. As more high-income individuals and businesses exit the system, the remaining contributors face increasing pressure, which could further incentivise emigration.
Meanwhile, government spending on social programs continues to rise without a proportional increase in revenue, exacerbating the fiscal imbalance.
Economists stress the urgency of broadening the tax base by fostering economic growth, creating jobs, and improving the efficiency of public services to restore trust among taxpayers. Without these measures, South Africa risks an economic and social crisis that could take decades to resolve.
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