1.5% of South Africans pay 61% of all income tax

978,140 South Africans, or 1.5% of the population, pay 60.9% of all personal income tax, the government’s biggest revenue generator.

Even more concerning is that only 235,542 South Africans, or 0.4% of the population, pay 33% of all personal income tax.

This was revealed in the 2025 Budget Review, which Finance Minister Enoch Godongwana was to table on Wednesday, 19 February 2025.

However, due to a dispute regarding the planned 2% value-added tax (VAT) increase, the budget speech was postponed until Wednesday, 12 March 2025.

Despite the postponement, the National Treasury provided the media with documents regarding the 2025 Budget Review.

It showed that the government needed to raise R58 billion in additional revenue in 2025/26 to address its spending needs.

To raise this additional revenue, Godongwane was set to raise the VAT rate by 2 percentage points to 17 per cent.

However, with this big VAT raise now off the table, many people wonder where the additional money will come from.

Initial speculation suggests higher alcohol and tobacco excise duties and an increase in the fuel levy. Another option is to roll back the planned zero-rating VAT basket expansion.

However, these interventions would raise only around R8 billion annually, a far cry from the R58 billion hole in the budget.

The South African Revenue Service (SARS) collects most of the tax from personal income tax (PIT), VAT, and company income tax (CIT).

Therefore, many people have considered personal income tax a possible place for the government to generate more income.

However, many economists, including the award-winning Dawie Roodt, highlighted that South Africans are already overtaxed.

Twenty years ago, tax revenue was 19.8% of South Africa’s gross domestic product (GDP). Today, it is 24.5%.

Simply put, South Africa’s tax per citizen and average tax-to-GDP ratio have increased significantly over the twenty years.

Roodt highlighted that South Africa is already on the wrong side of the Laffer curve, which means raising personal income tax will not generate more revenue.

No personal income tax increases planned

South Africa’s highly concentrated taxpayer base means that the government must approach personal income tax increases with caution.

The fact that 978,140 South Africans pay 60.9% of all personal income tax and 235,542 South Africans pay 33% highlights this point.

These taxpayers are worth gold to South Africa and fund most of the government’s social development and other projects.

However, wealthy people and their money are also very mobile. Should tax rates increase, the country could lose them and their tax contributions.

The now-delayed 2025 Budget Review was set to partially adjust the personal income tax brackets to limit bracket creep.

Bracket creep occurs when tax tables and deduction limits are not adjusted for inflation. This causes taxpayers to pay more, resulting in greater revenue without hiking rates.

Last year, the tax tables were not adjusted for inflation, which means that there was significant bracket creep.

This year, it was set to change. To protect lower-income earners, the two bottom-income tax brackets and all the rebates were to be fully adjusted for inflation.

The remaining personal income tax brackets were to be adjusted partially, which would have limited bracket creep for high-income earners.

This means that wealthy South Africans would pay a higher proportion of their income in tax, but the pain was somewhat limited.

However, this is still an example of a wealth tax, where the top-earning South Africans pay much more of their earnings to the state.