The invisible way the government takes more money from South Africans every year

The National Treasury has relentlessly and quietly expanded the personal income tax (PIT) burden over the past 20 years, significantly increasing the revenue squeezed from individual taxpayers without substantial tax hikes. 

This has been done through steadily increasing the range of income subject to tax while reducing available tax deductions and reliefs. 

While this is not an explicit increase in the tax rate, it has proven extremely lucrative for the government, enabling it to raise more revenue from a tiny number of taxpayers. 

PwC’s tax experts refer to this as “the invisible tax hand” in a recent research note on how the PIT burden has quietly grown over the past two decades. 

PIT remains the single largest and most stable source of government revenue, with the government playing a dangerous game by squeezing more revenue from a small number of taxpayers. 

The experts used their research to dispel a common narrative that the rates of PIT have been declining since 1990. 

“This perception leans on a superficial reading of PIT history, pointing to the reduction in the number of tax brackets or the drop in the top marginal rate to as low as 40% in the 2000s,” the experts said. 

“When measured against the full tax policy landscape, this narrative quickly proves to be inaccurate.”

A key indicator of this growing tax burden is the ratio of PIT collections to South Africa’s GDP, with the rising ratio signalling a tax system extracting a progressively larger share of tax revenue from individuals. 

The experts pointed out that South Africa’s PIT burden is not only at a record high but also among the highest in the world, far exceeding the average of other middle-income countries. 

South Africa’s PIT burden as a share of GDP even exceeds that of the members of the Organisation for Economic Cooperation and Development (OECD), which includes many highly developed economies. 

In 2001, PIT collections were roughly 8% of GDP, but fell sharply in the 2000s as tax rate relief was granted to taxpayers. However, this figure is now set to cross 10% in the coming year. 

“This is no accident. It reflects a strategic policy pivot towards relying on the stable revenue from PIT over the more volatile corporate income tax, whose contributions fluctuate with economic cycles,” PwC’s experts said. 

Individuals feel the pain

PwC’s tax experts explained that the South African economy, and therefore the state’s revenue, came under immense pressure over the past 15 years due to prolonged economic stagnation. 

Over the past decade and a half, South Africa’s economy has hardly grown while state spending has skyrocketed, creating multiple, large deficits in succession. This created immense financial pressure on the government. 

“For the most part, the release of that pressure came through deliberate actions ot increase the aggregate PIT burden,” the experts said. 

This has had a significant impact on individual finances, with South Africans taking home less and less money after SARS has had its share. 

PwC’s experts used an individual who earns R2.5 million in today’s terms on an annual basis and compared their effective tax rates for every year since 2001. 

Based only on headline rates and rebates, which is simplistic, the taxpayer’s effective tax rate has dropped from approximately 33.3% in 2001 to 31.8% in 2025. 

This, they explained, forms the basis of the myth that the PIT burden on individual taxpayers has fallen over time. 

“However, this view ignores important changes to broaden the PIT tax base, including the treatment of employment benefits,” the experts explained. 

For example, if a high earner received part of their compensation as a travel allowance, which is common, their effective tax rate actually increased from 28.7% in 2001 to 31.3% in 2025 – despite the cost to the company remaining flat at R2.5 million.

This is only one example of how the National Treasury has tried to systematically expand the tax base, but not by adding individuals to it. Rather, the ‘base’ is increased by expanding the range of income subject to tax. 

“Base broadening, in this sense, refers to increasing the range of income subject to tax while reducing available tax deductions and reliefs,” the experts explained.

In effect, the number of individuals paying PIT has remained relatively flat, but the amount of income that is subject to tax has surged, and relief has been limited.

This can be seen in the timeline below, courtesy of PwC’s experts, which shows how the state has systematically squeezed more PIT revenue from the same number of taxpayers over the past 20 years.