South African wealth taxes already here

Amid growing calls for the National Treasury to adopt a wealth tax in South Africa, legal experts at ENS Africa said the country already has many forms of this type of tax, which will likely worsen.

Several left-leaning organisations have called Finance Minister Enoch Godongwana to forego mass-impact tax hikes, such as increasing VAT, and focus on the country’s super-wealthy.

Talk of a wealth tax targeting the country’s top 5% of earners has been floating around the public sphere for years, but the Treasury has hesitated to implement it.

Further steps towards this tax measure were taken in 2023 and 2024 as the South African Revenue Service (SARS) collected information on high-net-worth individuals holding R50 million or more in assets.

This has yielded positive results, with the taxman drawing in billions in additional revenue from this tax base by ensuring they pay their dues.

According to ENS Africa, the Treasury is now considering this data to determine whether a wealth tax may be imposed on such individuals.

However, legal experts argue that South Africa already has many wealth taxes in full effect and that adding another one may be a step too far.

The firm said South Africa already taxes the wealthy with its progressive personal income tax system that taxes returns on wealth, maxing out at 45% for those earning over R1.8 million.

Other wealth taxes include estate duty, donations tax, securities transfer tax, transfer duties, luxury car tax, and capital gains tax.

Not only are South Africa’s wealthy already heavily taxed, but their share of taxes has also increased significantly.

South Africa’s highest marginal tax rate is 45%. While still lower than in many developed economies, it is very high compared to other developing countries.

South Africans reach the top marginal tax rate with an income of R1.8 million per year, while in a country like the United Kingdom, an equivalent income of R3 million is taxed in the top bracket.

ENS pointed out that, as the tax thresholds were not adjusted for inflation in the previous budget, the so-called “bracket creep” raised an additional R16 billion of revenue in 2024/25.

In the original 2025 budget, shelved back in February, Godongwana intended to introduce below-inflation adjustments to the tax brackets to mitigate some of this creep.

However, with the new budget, it’s widely anticipated that no adjustments will be made so the Treasury can tap into this small pool of additional revenue to balance the books.

By not adjusting the brackets for inflation, South Africans who receive inflationary salary increases will be pushed into a higher tax bracket, paying more tax without a tangible increase in their standard of living.

Rich South Africans get little in return for their taxes

Similar to tax bracket freezes, other ‘wealth taxes’ have faced the same measures, giving the Treasury ample resources.

• There has been no increase to the R3.5 million abatement on estate duty since 2008;
• Donations tax has been payable on amounts larger than R100 000 since 2008;
• Taxes on luxury goods and excise taxes have seen above-inflationary increases, and South Africa’s maximum transfer duty rate of 13% is amongst the highest in the world.

Despite paying all these additional taxes, South Africa’s wealthy get very little in return for their heavy tax burden.

Due to widespread public service delivery failures in policing, health, and education, taxpayers have to turn to private security, private education, and private healthcare to enjoy a high standard of living.

ENS said another tax to target the rich is unlikely to yield significant additional revenue and may encourage wealthy taxpayers to emigrate. “This would hurt the tax base as a whole,” it said.

“There are also additional complexities associated with the imposition of a wealth tax, especially in the context of assets held in trusts,” it said.

The legal experts said that it is unlikely that the 2025 budget will include a separate wealth tax for top earners, but that does not mean that one will not eventually be introduced.

ENS said that it anticipates the outcome of the National Treasury’s analysis of SARS data and an update in the budget on whether any additional wealth taxes may be imposed in the future.