This has raised concerns about the sustainability of the current system. The data revealed that South Africa’s tax base has grown by less than 16% over the past decade, while the revenue from personal income tax has more than doubled.<\/p>\n\n\n\n
Interestingly, while the number of personal income taxpayers increased, the total number of registered taxpayers decreased by almost 7% between 2014 and 2024. <\/p>\n\n\n\n
PwC tax partner Professor Osman Mollagee recently outlined the problems with South Africa\u2019s shrinking tax base.\u00a0<\/p>\n\n\n\n
Mollagee noted only a small percentage of South Africans are responsible for paying over 90% of all personal income tax and criticized the 2024 Budget for failing to address the shrinking tax base and the challenge of generating more revenue from fewer people. <\/p>\n\n\n\n
The 2024 Budget showed that the number of personal income taxpayers in South Africa declined to 7.12 million in 2023, compared to 7.45 million the previous year.<\/p>\n\n\n\n
According to Mollagee, the tax base in South Africa is even more concentrated than what was outlined by the National Treasury. <\/p>\n\n\n\n
To add to the problem, Godongwana announced during this year’s Budget Speech that the government will not adjust personal tax brackets for inflation, which is expected to run at 4.9% this year.<\/p>\n\n\n\n
The lack of adjustment of tax tables and tax deduction limits for inflation results in a phenomenon called ‘bracket creep’. <\/p>\n\n\n\n
It causes taxpayers to pay more, resulting in increased revenue for the government without hiking the tax rates. <\/p>\n\n\n\n
This strategy is used to help fill the widening deficit. South Africa’s personal income tax base is expected to grow to 7.41 million in 2024, which is only a 15.43% increase from a decade ago. <\/p>\n\n\n\n
However, it is worth noting that the government’s personal income tax revenue has increased by 109% over the same period \u2013 outstripping inflation by 48.4% over the same period. <\/p>\n\n\n\n
The South African government is facing the challenge of generating more revenue from a stagnant tax base. <\/p>\n\n\n\n
This challenge is becoming more concerning as a growing number of taxpayers are leaving the country, thereby reducing the tax base and posing a threat to the government’s future revenue. <\/p>\n\n\n\n
Beatrie Gouws and David Warneke, BDO tax specialists, have pointed out that high-income earners are increasingly discontented with excessive taxation, which they feel stifles entrepreneurship and undermines economic growth.<\/p>\n\n\n\n
Many high-earning individuals are choosing to leave their home countries due to high taxes and other factors. <\/p>\n\n\n\n
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