National Treasury’s data about registered taxpayers and taxable income revealed that only 2 million South Africans pay 80% of all personal income tax.
It further revealed that 113,000 individuals, or 1.6% of registered taxpayers, who earn over R1.5 million per year pay 27% of all personal income taxes.
The problem for South Africa is that these individuals are leaving for countries like the UK, Australia, New Zealand, and America.
This concerning trend was highlighted in Biznews founder Alec Hogg’s presentation about finance minister Enoch Godongwana’s 2022 medium-term budget.
He added that a shrinking number of individuals must support a growing number of social grant recipients.
“The people who build the economy and create jobs are leaving the country while the number of people receiving grants is increasing,” he said.
Hogg echoed Efficient Group chief economist Dawie Roodt’s words that the tax burden is getting heavier on a smaller number of individuals.
The economy is not growing, and many taxpayers are leaving the country, which places tremendous pressure on South Africa’s finances.
Roodt said he is very concerned about South Africa’s economic situation because so many people rely on the state for income.
“The state cannot afford this anymore. The tax base is simply not strong enough to carry it,” Roodt said.
Eunomix economist Claude de Baissac has also warned that South Africa is too dependent on tax from rich citizens, who are leaving the country in droves.
De Baissac said a large part of personal income tax comes from higher-income earners and that working-class taxpayers are disappearing.
Keith Engel, CEO of the SA Institute of Tax Professionals (SAIT), said the solution to inequality and tax collection is not to take from the rich but to grow the South African economy.
Inequality is mainly a result of the high unemployment rate, and the only way to improve the situation is to create new jobs.