South Africans pay more tax than ever before but get far less

South Africa’s tax-to-GDP ratio increased from 20.2% in 1994 to 25.1% in 2024, which means citizens have the highest tax burden in history.

The tax-to-GDP ratio measures the overall tax burden for a given period. The International Monetary Fund (IMF), the World Bank, and other organisations use this ratio to analyse and compare countries’ tax systems.

South Africa’s tax-to-GDP ratio for the 2024/25 fiscal year rose to 25.1%, up from 24.5% in 2023/24.

This means that tax revenue grew faster than economic activity. It also showed that South Africans pay more tax than ever before.

The South African Revenue Service (SARS) said the higher ratio also reflects improved administrative efforts in collecting tax revenue amid poor economic growth.

“These efforts, particularly through compliance-revenue initiatives, played a significant role in boosting tax collections,” SARS said.

It also means that SARS takes more money from hard-working South Africans and successful companies and gives it to the state.

South Africa’s government is known for mismanagement, corruption, and poor capital allocation. Simply put, it wastes a large portion of taxpayers’ money.

This is why renowned economists like Dawie Roodt advise South Africans to pay as little tax as possible.

He explained that taxpayers should object to the government’s overspending by using legal means to pay as little tax as possible.

“I encourage people not to break any laws but to make use of every possible loophole to pay as little tax as possible in South Africa,” he said.

“One rand in your pocket is worth much more than one rand in the pocket of the civil servants and the government.”

South Africans’ tax money is wasted

Data on the efficiency of public spending in South Africa reveals a growing disconnect between the taxes collected and the services delivered.

Reports from the Auditor-General and National Treasury highlight specific trends in wasteful expenditure and declining value for money.

In the 2023/24 financial year, total fruitless and wasteful expenditure amounted to R2.57 billion, an increase of 49% from the previous year.

The Auditor-General identified hundreds of material irregularities involving non-compliance or suspected fraud, costing taxpayers billions.

Another problem is that the state is spending far more than it collects, which, in turn, has significantly increased South Africa’s debt.

It has reached a situation where one out of every five rands of government revenue now goes toward servicing debt.

The most damning data about the lack of quality state services for South African taxpayers comes from Roodt.

He said South African taxpayers typically only get 5 cents of value from the government for every R1 they pay to SARS.

He explained that personal income taxes generate the most revenue for the state. However, these taxpayers get very little in return.

Roodt created an equation to establish the value these taxpayers receive in return for the money they give to the government.

He highlighted that he had to make assumptions for this equation, including that the state does not waste resources.

“I know this is not the case. Due to corruption, incompetence, and mismanagement, there is a lot of wastage in the government,” he said.

However, even with this assumption, a household with an income of R1 million per year will receive less than 5% of the value of the taxes they pay.

Put differently, for every R1 this family pays in taxes, it will receive less than 5 cents in value from the government.

“If the family’s income goes up to R2 million or R3 million per year, they get far less value from the state for the tax they pay,” Roodt said.

Tax revenue as a percentage of GDP from 1994 to 2024