Do we pay too much income tax in South Africa?

 ·21 May 2015

Amid new e-toll tariffs, electricity price hikes and a potential fuel price increase, many South Africans are beginning to feel financially overwhelmed.

There is a perception that South African’s are overburdened when it comes to paying tax, especially after Finance Minister Nhlanhla Nene increased taxes on personal incomes for the first time in twenty years.

Data from KPMG which ranks the countries with the highest personal income tax, found that South Africa features among the top 50 highest income tax paying nations in the world.

With a peak income tax of 41%, the country ranks as the 31st highest tax-paying nation in terms of individual tax.

Previously, the country tied with Chile, Croatia and Uganda in 32nd position with a maximum tax rate of 40%.

In the 2016 tax year (1 March 2015 – 29 February 2016), South Africa’s highest tax rate increased to 41% for individuals earning over R701,301. All South African tax brackets have a base payment, with the percentage applying to the amount over that.

The data from KPMG looks at the highest possible personal income tax in the country, discounting the various tax brackets and conditions required to hit that level.

For example, in South Africa those earning below R70,700 per annum do not get taxed (R73 650, in 2016), while the entry bracket of 26% applies to those earning over R181,900.

According to a quarterly Labour Market Report by Solidarity, published earlier this week, only 3.3 million out of a total 33 million eligible tax payers in the country pay 93% of all personal income tax.

Worse still, only 3.7% – or 1.1 million people – pay just short of 70% of the total income tax received.

These are the South African tax brackets for 2016:

​Taxable income Rates of tax
​0 – R181 900 18% of each R1.00
R​181 901 – R284 100 R32 742 + 26% of the amount above R181 900
R​284 101 – R393 200 R​59 314 + 31% of the amount above R284 100
R​393 201 – R550 100 R 93 135 + 36% of the amount above R393 200
R​550 101 – R701 300 R149 619 + 39% of the amount above R550 100
R701 301 and above R208 587 + 41% of the amount above R701 300

Highest tax payers

KPMG lists Aruba as the highest individual taxer, with a maximum tax rate of 58.95%

Aruba’s tax applies for people earning the equivalent of R1.9 million or more, after tax-free income has been deducted.

Other high-tax nations include Sweden (57% for those earning over R890,000), Denmark (55% for those earning R850,900 and more) and the Netherlands and Spain (52% on income over R800,000 and R4.1 million, respectively).

Countries with the lowest tax rate include many nations such as Saudi Arabia, Kuwait, Anguilla which do not tax income.

Sweden’s tax collection agency is one of the most popular and most trusted organizations in the country – notably because it works efficiently and contributes meaningfully to Swedish society.

20 highest tax-paying nations

# Country Income tax rate
1 Aruba 58.95%
2 Sweden 57.0%
3 Denmark 55.41%
4 Finland 52.35%
5 Netherlands 52.0%
6 Japan 50.84%
7 Austria 50.0%
7 Belgium 50.0%
7 Israel 50.0%
7 Slovenia 50.0%
7 Senegal 50.0%
12 Netherlands Antilles 49.0%
13 Curacao 48.25%
14 Ireland 48.0%
14 Portugal 48.0%
16 Sint Maarten 47.5%
17 Norway 47.2%
18 Spain 47.0%
19 Iceland 46.24%
20 Australia 45.0%
31 South Africa 41.0%

Previous research from PwC and the World Bank shows that in 2015 South African businesses pay the 40th highest taxes in the world, paying just under 29% in total taxes.

South Africa’s total tax rate for businesses is also the 6th lowest on the African continent, below Lesotho (13.6%), Zambia (14.8%), Namibia (20.7%), Mauritius (24.5%) and Botswana (25.3%).

More on tax

How SA taxes are like one big ‘scam’

SA taxes: you’re paying more than you think

Online tax laws holding SA companies back

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