High taxes chase rich people out of South Africa

Award-winning economist Dawie Roodt said wealthy South Africans have two main requests – taking their money out of the country and paying less tax.

The high taxes and unstable local economic environment have reached such concerning levels that many wealthy individuals are leaving South Africa.

Roodt shared this information during a Biznews interview about the planned value-added tax (VAT) increase and South Africa’s tax regime.

He highlighted that South Africa has a very narrow tax base, with a small number of companies and individuals paying most of the country’s taxes.

South Africa’s 2024 tax statistics revealed that only 1,051 companies pay 72.3% of all company income tax in the country.

Companies with taxable income greater than R100 million constituted 0.1% of the total number but contributed 72.2% of taxable income and 72.3% of assessed tax.

The same goes for personal income tax. 978,140 South Africans, or 1.5% of the population, pay 60.9% of all personal income tax.

Even more concerning is that only 235,542 South Africans, or 0.4% of the population, pay 33% of all personal income tax.

Roodt said that this is unsustainable and that South Africa should focus on economic growth, which will create more taxpayers.

He explained that the current mixture of taxes in South Africa is harmful to economic growth and must be changed.

“We are losing our rich people. They are emigrating or very aggressively structuring their tax affairs because taxes are so high,” he said.

He said as an asset manager at Efficient Wealth, people who come into his office tell him two things:

• I want to take my money out of the country.

• I want to pay less tax.

South Africa is already on the wrong side of the Laffer curve, meaning tax increases will not increase tax revenue.

A particular concern is high company taxes. “South Africa’s company tax of 27% is far higher than global standards, which makes the country less competitive,” he said.

“We have to reduce company taxes to make South Africa more attractive as a global investment destination. This will improve economic growth and increase employment.”

Higher employment means more South Africans will pay value-added and personal income taxes, removing the pressure on the current small tax base.

He advocated for a total revamp of South Africa’s tax regime. “It needs to be simplified, and some taxes need to be reduced and changed,” Roodt said.