Taxpayers flooding out of South Africa

South African Revenue Service (SARS) Commissioner Edward Kieswetter said South Africans leaving the country in search of better lives is impacting the government’s tax revenue.

His comments followed Finance Minister Enoch Godongwana’s Medium-Term Budget Policy Statement on Wednesday, 30 November 2024.

Godongwana revealed that South Africa faces a significant tax revenue shortfall for the 2024/25 financial year. Tax collection for 2024/25 is expected to be R22.3 billion lower than estimated in February.

“In the absence of faster growth and in the face of external risks, tax revenue will remain under pressure, forcing us to make difficult decisions on where to spend,” he said.

“Lower revenue also means that we cannot, within the envelope, accommodate all of the demands on the fiscus.”

Kieswetter told SABC News that there are three main reasons why tax revenue fell short this year.

• Lower personal income tax.
• Lower revenue from the fuel levy.
• Lower revenue from imports.

The first reason is one of the most important reasons for South Africa’s lower-than-expected revenue, and Kieswetter explained that it was a multifactorial problem.

At the start of this year, SARS assumed personal income tax would be higher based on public wage bill growth and job creation estimations.

SARS assumed that the wage bill would grow by 8.4% and that South Africa would add another 32,000 net jobs into its labour market.

However, the wage bill only grew by 5.4%, and job growth was far lower than expected due to more-than-expected retrenchments and increased emigration.

“We’ve also seen an uptick in applications for individuals to end their tax residency because they relocate to overseas countries,” Kieswetter said.

This increase in emigration presents a significant problem for South Africa’s tax revenue, as the country already has a very small and overburdened tax base.

Following the February Budget this year, BDO tax specialists Beatrie Gouws and David Warneke warned that South African taxpayers are leaving the country in their thousands, shrinking its already small tax base and threatening the government’s future revenue. 

Historically, high-earning taxpayers have borne the brunt of tax hikes and policy changes to redistribute wealth and bolster social programs. 

However, in recent years, there has been growing discontent among high-income earners, who argue that excessive taxation stifles entrepreneurship and undermines economic growth.

This has resulted in many top earners choosing to emigrate due to increasingly high taxes, among other reasons. 

For example, the 2024 BRICS Wealth Report highlighted a 20% decline in dollar millionaires in South Africa between 2013 and 2023.

The report showed that South Africa has lost approximately 9,350 US-dollar millionaires over the past ten years. 

Data compiled by The Outlier earlier this year also showed that highly skilled professionals are leaving South Africa to move to other countries. At the same time, the local economy faces a skills shortage.

The data showed that just over 900,000 South Africans lived abroad in 2020, up significantly from 500,000 in 2000. 

Of these 900,000 people, 7 out of 10 live in Europe or Oceania. In particular, Australia and New Zealand have seen a large growth in South African residents. 

The Outlier revealed that, in March 2021, 205,000 South Africans were living in England and Wales alone, according to the Office for National Statistics. 

Many are highly qualified, with 54% of those aged 16 years and older holding higher education qualifications such as a degree.

A similar trend can be seen in Australia, where 43% of South Africans who have moved there have a bachelor’s degree or higher.

There were 189,207 people born in South Africa living in Australia in 2021 and over a third (36%) were working as professionals and 15% as managers.

This means South Africa is losing critical skills and wealthier taxpayers who contributed significantly to SARS’ tax revenue to other countries.