Rich people leaving South Africa
The South African Revenue Service has lost out on R3 billion in collectable tax due to 38,000 taxpayers ending their tax residency.
According to the latest annual tax statistics for 2024, SARS noted that about 38,000 taxpayers indicated that they had ceased being tax resident in South Africa.
Looking at the taxable income and tax liability for these individuals over ta ten year period, it is evident that the tax collector has missed out on about R3 billion due to the move.
It should be noted that tax residency is not the same as nationality, permanent residence, or citizenship, so it is not an accurate reflection of raw migration numbers.
However, it is one of the few official tracking points the government has to follow patterns and trends.
A taxpayer can still be a South African citizen while being a tax resident in another or multiple countries. In fact, many tax and emigration experts will quickly point out that South Africans who emigrate and leave assets behind may still have tax obligations back home.
Changing your status from resident to non-resident must be done formally through a declaration process to SARS. Emigration and citizenship change is done through Home Affairs.
However, whether emigrating or changing tax residency, the end result is the same for South Africa – the country loses tax revenue.
SARS previously noted that ceasing to be a South African tax resident and similar changes to the status of individuals can imply permanent erosion or changes in the tax base.
However, even a person who ceased to be a South African tax resident is still taxed on their South African-sourced income, SARS said.
For the 2014 tax year, 44,693 taxpayers declared a taxable income of R21.6 billion, in which the tax collectable was R6.2 billion.
For the 2023 tax year, this number of assessed taxpayers decreased to 37,584, or by 15.9%.
Taxable income decreased to R9.9 billion, and tax payable decreased by 49.3% to R3.2 billion.
SARS noted that these decreases in the value of taxable income and tax paid were realised mainly by the bracket above R150,000 taxable income, mainly males between 35 to 44 years old.
This is a continuation of the data seen in previous years that reveals a worrying trend.
At face value, the data presented by SARS shows a lower number of wealthy South Africans (R500,000+) ending their tax residency, and South Africa losing out on less tax revenue from this group.
Overall, the total number of South Africans ending their tax residency seems to be declining (though it is up from 2023’s stats).
However, experts have previously pointed out that this seemingly declining trend may be due to the fact that a lot of wealthy individuals may have already ended their tax residency (ie, there are fewer remaining who can cut ties).
Another explanation may be through the shifting demographics, where younger and more middle-class taxpayers are now also opting to cut ties with SARS.
This is evident in the latest data as well, where SARS noted that the number of taxpayers with taxable income of zero or less ending tax residency skyrocketed by 575.9% – from 1,814 individuals in 2014 to 12,260 in 2023.
But even discounting the trend and shifting demographics, it is evident that millionaires are still bailing on SARS.
According to the data, in 2023 approximately 1,700 millionaires changed their tax residency status, representing almost R5 billion in taxable income and almost R2 billion in assessed tax.
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