Zimbali Mncube<\/em><\/figcaption><\/figure><\/div>\n\n\nAdditionally, he advocates for a wealth tax and adjustments to tax rebates for high-income earners, along with increasing duties on dividends and estates. <\/p>\n\n\n\n
Mncube argues that these revenue-raising steps if carefully sequenced, could reduce inequality and support social services. <\/p>\n\n\n\n
\u201cI believe measures to raise revenue are essential,\u201d he says, \u201cand introducing a luxury VAT, along with a wealth tax, could have a positive impact if done in the right order.\u201d <\/p>\n\n\n\n
This would allow the government to expand social assistance programs without cutting into other essential areas of spending.<\/p>\n\n\n\n
The risks<\/strong><\/p>\n\n\n\nDespite the promise of increased social welfare, however, economists caution against imposing more taxes in South Africa\u2019s already narrow tax landscape. <\/p>\n\n\n\n
Social development, including grants and welfare, is a significant expenditure, comprising R387 billion of South Africa\u2019s 2024\/25 national budget. <\/p>\n\n\n\n
This includes old-age pensions, child support grants, and various social security funds. The government has pledged R1.17 trillion for welfare services over the next three years, but as the economy falters, sustaining such spending levels has become increasingly challenging.<\/p>\n\n\n\n
Currently, South Africa could soon have roughly 28.7 million people, or about 44% of the population, dependent on social grants. <\/p>\n\n\n\n
In contrast, only about 7.4 million taxpayers support this expenditure, with a small fraction bearing the majority of the tax burden.<\/p>\n\n\n\n
Economist Dawie Roodt warns that increasing taxes on the wealthy could drive tax evasion and capital flight, particularly as South Africa\u2019s tax base is extremely limited.<\/strong><\/p>\n\n\n\nAccording to Roodt, only 1.12% of taxpayers, about 163,700 individuals, are responsible for 30% of personal income tax revenue, while 19% of taxpayers contribute 87% of the total personal income taxes.<\/p>\n\n\n\n
The situation is similar for corporate taxes, where a mere 0.09% of companies contribute 62.5% of the country\u2019s corporate income tax, with 4.4% paying 95% of the total. <\/p>\n\n\n\n
This concentration of tax liability on a small group of individuals and corporations makes South Africa vulnerable to any reduction in high-income taxpayer compliance or relocation of businesses.<\/p>\n\n\n\n
Roodt argues that attempts to further tax these groups could lead to a collapse of the tax base as wealthy South Africans and corporations seek friendlier tax jurisdictions. <\/p>\n\n\n\n
\u201cIf this increases, the tax base will collapse as many of the 1.12%, as well as businesses, will simply leave the country \u2013 which they are already doing,\u201d he warns. <\/p>\n\n\n\n
There is already growing evidence of high-net-worth South Africans exploring tax havens like Mauritius, Malta, and the Isle of Man to safeguard their assets and escape South Africa\u2019s increasing tax burden.<\/p>\n\n\n\n
The debate over expanding social grants is, therefore, deeply complex. <\/p>\n\n\n\n
While there is a clear moral and economic argument for strengthening social assistance, especially given the high levels of poverty and unemployment, the practicalities of funding such an initiative are daunting.<\/p>\n\n\n\n
Implementing a luxury VAT and other wealth-focused taxes might generate the necessary revenue to increase the SRD grant but at the risk of eroding the tax base further and potentially accelerating capital flight. <\/p>\n\n\n\n
This delicate balance between addressing social needs and maintaining a viable tax base remains a critical challenge for South Africa\u2019s economic policymakers.<\/p>\n\n\n\n
\n\n\n\nRead: Big trouble for schools in the Western Cape<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"The IEJ has proposed some tax changes that would see the SRD grant increase almost double in South Africa.<\/p>\n","protected":false},"author":92,"featured_media":798459,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[1459,16194,853,18480,2887],"class_list":["post-798398","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-government","tag-dawie-roodt","tag-iej","tag-south-africa","tag-srd-grant","tag-tax"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/798398","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=798398"}],"version-history":[{"count":7,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/798398\/revisions"}],"predecessor-version":[{"id":798430,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/798398\/revisions\/798430"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/798459"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=798398"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=798398"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=798398"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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