South Africa can scrap most taxes without losing much money

South Africa has far too many taxes, which stifles economic growth and puts an unnecessary burden on citizens and businesses.

An analysis of South Africa’s expected tax revenue for the current financial year reveals that five taxes make up 94% of all tax revenue.

Personal income tax, value-added tax (VAT), corporate income tax, customs and excise duties, and fuel levies account for R1.756 trillion of tax revenue.

All other taxes, including skills development taxes, transfer duties, the plastic bag levy, sugar taxes, and estate duties, are only set to bring in R107 billion.

This means the government can scrap many smaller taxes and make up the deficit with a slight increase in personal income tax or VAT.

The insignificant taxes include an electricity levy, universal service fund, levies on financial services, CO2 motor vehicle emissions tax, and an incandescent light bulb levy.

There is also a turnover tax for micro businesses, a tyre levy, and an international oil pollution compensation fund carbon tax (from 2020/21).

South Africans further have to pay air departure taxes, a donations tax, and a health promotion levy on imports.

These taxes complicate life and, considering how little money they add to state coffers, can be done away with.

Renowned economist Dawie Roodt explained that the complex tax regime originated from South Africa’s segregated past.

As tax rates increased inexorably over the years, wealthy taxpayers found it in their interest to hire experts to help them minimise their tax obligations.

Thus, a never-ending battle began between sophisticated taxpayers and their expert advisers seeking legal ways to avoid tax and the state seeking to close loopholes.

One result is that tax laws have become so complicated that almost everyone is baffled by them. The Income Tax Act still contains exceedingly technical and abstruse wording.

He called for an overhaul and simplification of the current tax regime, which focuses mainly on higher-income individuals.

Roodt explained that the complex tax regime creates undue compliance costs, especially for small businesses. “They are one of the greatest inhibitors of small firm development,” he said.

He said tax laws are far too complex for most taxpayers to understand and called on the government to simplify all the laws.

“It is generally agreed that a good tax system needs to be characterised by simplicity, certainty, neutrality, and a low cost of administration and collection,” Roodt said.

“The present South African system falls short of all these ideals.”

Tax revenue breakdown

The table below provides a breakdown of expected tax revenue for the 2024/2025 financial year.

Personal income taxR738.7 billion39.7%
VATR476.7 billion25.6%
Corporate income taxR302.7 billion16.2%
Customs and excise dutiesR141.8 billion7.6%
Fuel leviesR95.8 billion5.1%
OtherR107.2 billion5.8%


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