Red flags for South Africa’s overburdened tax base

Staff Writer31 October 2022


Data from the National Treasury’s medium-term budget shows that 2.5 million South Africans are estimated to cover 84% of all personal income tax over the 2022/23 financial year.

This is up from some 2 million taxpayers covering 80% of the tax burden in the last year.

While economists and financial service firms often warn of a shrinking tax base due to emigration, Treasury’s data points to the country’s tax base actually growing over the current financial year.

However, the burden on taxpayers is clearly becoming increasingly top-heavy, with the biggest chunk of income tax being taken from top earners.

For 2022/23, Treasury estimates that 133,000 individuals, or 1.8% of registered taxpayers, who earn in the top income bracket of above R1.5 million annually – will end up paying 28% of all personal income taxes in the country this year.

This is up from a slightly lower burden of 27% placed on 113,000 individuals in 2021/22.

But it’s not only the richest of the rich taking on more – the data shows that anyone earning over R500,000 a year in South Africa will be carrying a greater tax burden in 2022/23. The only exception is the R750,000 to R1 million band – however, this is because it is not growing in proportion to other bands.

Estimates of individuals and taxable income (National Treasury)

This growing tax burden on wealthier individuals could lead to greater taxes being placed on the already small tax base or well-off taxpayers choosing to jump ship quicker than usual, economists warn.

Speaking to Daily Investor, chief economist at Efficient Group Dawie Roodt said that the tax burden is getting heavier on a smaller number of individuals.

The economy is not growing, and many taxpayers are leaving the country, which places tremendous pressure on South Africa’s finances, said Roodt.

“The state cannot afford this anymore. The tax base is simply not strong enough to carry it,” Roodt said.