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<\/a><\/p>\nLike many nations, South Africa has a progressive tax system where the more you earn, the more tax you pay.<\/p>\n
The country’s highest marginal tax rate is currently 45%, which is on par with several developing countries \u2013 including the United Kingdom, China, Australia, Switzerland, and South Korea.<\/p>\n
This is comparatively high when compared to Canada (33%), the USA (37%) and Brazil (27%). It is also higher than the maximum in neighbouring African countries, such as Namibia (37%), Botswana (27%), Mozambique (32%), and even Zimbabwe (40%).<\/p>\n
On the surface, these numbers suggest that South Africa\u2019s tax regime isn’t any better or worse than the majority of other progressive tax regimes worldwide.<\/p>\n
However, the tax burden on South Africans is significant – and ranks as one of the highest in the world.<\/p>\n
To illustrate this, one needs to look at the tax-to-GDP ratio, which shows how heavily citizens are taxed relative to the overall productivity of the country.<\/p>\n
According to the World Bank, a higher tax-to-GDP ratio means good things for the government, as it has a bigger budget with which to execute its spending programmes. It suggests a level of 15% at minimum is needed to meet social goals.<\/p>\n
The tax-to-GDP ratio in South Africa moderated from 23.8% in 2019\/20 to 22.5% in 2020\/21, largely due to the Covid-19 pandemic. In its latest annual report for 2021\/22, the South African Revenue Service recorded the country’s tax-to-GDP ratio at 24.6%. The ratio is expected to escalate further in 2022\/23 to around 25%.<\/p>\n
The South African Institute of Chartered Accountants (SAICA) said earlier this year in a presentation that it is evident that tax money is not being spent on making the country more productive, and taxpayers get very little out of the taxes they put in.<\/p>\n
“It is has become evident that South Africa\u2019s tax revenues have (on average) been growing despite weak economic growth,” SAICA said. “A high tax-to-GDP ratio is not a problem where taxpayers are receiving good value for their money; however, this is not a reality currently in South Africa.”<\/p>\n
Hidden taxes<\/strong><\/p>\n The OECD’s data tracks tax wedges which include many instances of social security costs covered by individual taxpayers and their employers, which ultimately push the average tax rate up in many nations quite significantly.<\/p>\n Belgium, which has the highest average tax rate, can see its tax burden climb even higher – to over 50% – when factoring in these social security costs.<\/p>\n