South Africans face tax clampdown as taxpayers flee the country

South Africa’s shrinking taxpayer base could force the South African Revenue Service (SARS) and the National Treasury to increase enforcement, raise taxes, or consider new measures like a wealth tax, placing greater pressure on remaining taxpayers and businesses.

Tax Consulting SA said pressure is building on South Africa’s already narrow pool of taxpayers, with fresh concerns emerging around the projected decline of nearly 200,000 taxpayers in 2026/27.

If this materialises and continues, the government may face difficult choices – from tightening enforcement to increasing taxes, and even reigniting debate around a wealth tax to plug the fiscal gap.

Tax Consulting SA’s 20th annual post-Budget webinar cast a spotlight on these issues through participant polling.

The event was attended by over 1,000 payroll, human resources (HR), and remuneration professionals from as far as Mauritius, the United Kingdom, the United States, and Canada.

Part of the discussion covered the sustainability of South Africa’s personal income tax base, including the impact of a shrinking taxpayer base, greater global financial transparency, and tighter enforcement of compliance.

SARS expects to collect R844 billion in personal income tax in 2026/27, rising to R947 billion in the outer year of the medium-term framework.

According to the National Treasury, the number of registered taxpayers is expected to decline by 196,721 to around 14.25 million in the 2026/27 tax year.

This comes even as the government expects personal income tax collections to remain the largest contributor to the fiscus.

In Tax Consulting SA’s webinar poll, 33% of participants said they believe SARS will respond with more aggressive enforcement if the number of taxpayers continues to fall.

Nearly a third (30%) of participants said they expect taxes to increase, and 15% fear that the controversial debate around a wealth tax could resurface.

The results reveal the growing concern among payroll and tax professionals that the burden on remaining taxpayers could intensify.

Emigration and bracket creep

One of the most significant drivers behind the shrinking taxpayer pool is the continued emigration of skilled South Africans.

Data presented during the webinar showed that 61% of individuals ceasing tax residency each year over a four-year period were between the ages of 18 and 44.

This means that a productive segment of the workforce is being removed from South Africa’s tax base every year.

High-income earners are also increasingly represented among those leaving the country, including those earning R2 million or more annually.

Webinar participants indicated that the trend cannot be attributed to a single cause. According to poll results, 59% believe that the decline in taxpayers is driven by a combination of factors.

This includes job losses, lower workforce participation, emigration, and ongoing clean-ups of the SARS taxpayer register.

Jerry Botha, Managing Partner at Tax Consulting SA and co-presenter, noted that while tax revenue lost from South Africans who emigrate is slightly lower than in earlier years, it still represents a significant leakage from the tax base.

South Africa’s remaining tax base is also facing other pressures, such as bracket creep and continuously rising costs.

Despite inflationary adjustments to tax brackets in the latest Budget, the first such relief in three years, many employees are still feeling the squeeze of bracket creep.

Tax Consulting SA’s Tax and Remuneration Specialist and co-presenter, Tanya Tosen, noted that insufficient adjustments in past years have left employees’ take-home pay under pressure.

When asked whether the Budget measures adequately account for inflation, 48% of online participants said the relief partially offsets inflation, and 43% said employees are still losing purchasing power.

SARS’ powers grow

This intersection between payroll, taxation, and compliance came under the spotlight during the webinar, particularly around offshore income and global financial transparency.

SARS is currently in the process of expanding its reach under the Automatic Exchange of Information framework.

As a result, HR, payroll, and remuneration professionals are facing new compliance risks tied to employees’ cross-border income, historical offshore arrangements, and the reporting of executive benefits and allowances.

Polled participants highlighted their top concerns in this regard – 32% cited data matching by SARS, 29% flagged a lack of internal awareness, and more than 20% were concerned about employee non-disclosure.

There are currently proposals seeking to allow over 14 government bodies to conduct lifestyle audits or flag inconsistencies between lifestyle and declared income to SARS.

Coupled with this, Tax Consulting SA said it is clear that rising enforcement and enhanced transparency are now also affecting employers.

More than half of webinar participants believe the expanded data-sharing framework leaves individuals highly exposed to scrutiny.

This is particularly true where income and lifestyle do not match. Around 28% indicated that only high-profile individuals face risk.

Botha warned that this development has direct implications for employers regarding benefits such as executive perks, incentive travel, allowances, and offshore remuneration when they are incorrectly reflected in payroll and tax reporting.

“The only way SARS is going to collect more revenue is by strengthening enforcement,” he said. “And the legislation we are seeing increasingly reflects this approach.”

The deeper message from the webinar was that a dwindling tax base and tighter compliance requirements make foresight and proactive planning essential for both employees and employers.