South Africans will pay R16.3 billion more in tax in 2024

South Africans will have to pay an additional R16.3 billion in personal income tax in 2024, as the Finance Minister did not adjust the country’s tax brackets for inflation. 

This is according to tax specialists at BDO Beatrie Gouws and David Warneke, who revealed how much the government can expect to rake in from ‘bracket creep’ over the next three financial years. 

Bracket creep happens when tax tables and tax deduction limits are not adjusted for inflation, making taxpayers pay more and thus resulting in greater revenue without hiking rates.

Traditionally, the government adjusts tax thresholds annually to counteract the effects of inflation. However, for 2024, these thresholds will stay the same.

Thus, if an inflation-related raise is given, earners may be pushed into a new tax bracket and pay relatively more in tax. 

So, while South Africans breathed a sigh of relief as the 2024 budget avoided any rate increases to income tax, they will still end up handing over more money to the government. 

Individuals are expected to pay R16 billion more in tax during the 2024/25 fiscal year, R17.3 billion in 2025/2026, and R18.6 billion in 2026/2027. 

Gouws and Warneke said while this seems to be a drop in the ocean when considering a R1.8 trillion budget, it will have a much stronger impact on the finances of South Africans as the country has a small tax base. 

Personal income tax as a proportion of total revenue collected will increase by 2% in 2024 compared to 2023, with only 5% of the population paying around 92% of PIT. 

This shows the precarious position of the country’s tax base, with more and more revenue being squeezed from fewer people. 

PwC tax partner Professor Osman Mollagee outlined the problems with South Africa’s shrinking tax base. 

Mollagee was speaking at PwC’s post-budget event, where Finance Minister Enoch Godongwana’s Budget Speech was praised for navigating the pre-election need to win votes and be pragmatic. 

However, Mollagee pointed out that while the Budget Speech was pragmatic, it failed to address the country’s shrinking tax base and the problem of squeezing more revenue from fewer people. 

National Treasury’s estimates of individuals and taxable income for 2023/24 clearly illustrate a problem.

They show South Africa has 7.1 million individual taxpayers, down from 7.4 million a year ago. The country’s registered taxpayers are declining, while government expenditure is increasing. 

South Africa now has four times as many grant recipients as personal income taxpayers.