South Africa’s richest taxpayers are leaving the country

While the loss of taxpayers has been a growing problem for South Africa over the last decade, the Covid-19 crisis could prove to be a tipping point.

For the first time since the current tax brackets were established six years ago, the country will see a drop in the number of top earners this fiscal year, data from Reuters shows.

Revenue from the three highest brackets will fall by 8%, or around R22.6 billion according to previously unreported treasury forecasts.

• The number of taxpayers earning R1.5 million or more will shrink 9.6% for the 2021-22 fiscal year.
• The R1 million to R1.5 million bracket is expected to contract 13%.
• The R750,000 to R1 million rand bracket is expected to contract 1.1%.

Personal income tax accounts for 38% of total tax revenue, far eclipsing corporate tax receipts, and those in the top three brackets represent a third of the total personal income tax base.

Treasury said that it cannot attribute the drop directly to emigration as it does not track data on how many people have left the country. However, immigration consultants, real estate companies and bankers told Reuters they are seeing clear signs of wealthy people leaving.

Thousands of millionaires lost 

The latest research from New World Wealth and AfrAsia Bank shows that South Africa lost 3,400 dollar millionaires over the last year, with the country now home to only 35,000 high net worth individuals (HNWIs).

HNWIs are defined as dollar millionaires or people with a net worth of $1 million (R14.6 million) or more.

In December 2019, New World Wealth reported that there were approximately 38,400 dollar millionaires living in the country – down by 800 from the number recorded for 2018 when there were 39,200 millionaires recorded.

The 2018 figure was down significantly – a loss of 4,400 millionaires – from the year before that (2017), showing a continued trend of money leaving South Africa, either through emigration, or destruction of wealth through the weak economy.

Overall, between 2017 and 2020 South Africa lost 8,600 millionaires.

Read: Big changes for emigration in South Africa – what you should know