100,000 millionaires dodge tax in South Africa

In the aftermath of the 2025 budget, SARS Commissioner Edward Kieswetter commented that he believes there are 100,000 people in South Africa who currently earn over R1 million a year and are not registered for tax.

Finance Minister Enoch Godongwana announced during the 12 March budget speech that the South African Revenue Service (SARS) would receive R7.5 billion to improve its systems and improve tax compliance.

Although SARS has not confirmed how this 100,000 estimate of tax non-compliant millionaires was reached, experts estimate that it was likely done by monitoring the spending of individuals in South Africa.

Jashwin Baijoo, Associate Director at Tax Consulting SA, explained that SARS has detected a whopping 156,000 taxpayers who, despite engaging in substantial economic activity, are either not registered taxpayers, or have defaulted in filing their tax returns.

This is especially concerning considering that a small number of South Africans are responsible for carrying most of the country’s tax burden.

In the 2023/24 fiscal year, gross tax revenue reached R2.2 trillion, primarily driven by personal income tax (PIT).

However, the tax burden falls heavily on a mere 1.6 million individuals, representing just 2.6% of the population, who contribute 76.2% of all personal income tax.

On the other hand, nearly 30 million people in South Africa are reliant on social grants.

The fact that thousands of people are not paying SARS – despite being financially well-off enough to do so – means that the burden falls even more heavily on law-abiding South Africans who, according to many experts, are already “overtaxed”.

In the 2025 Budget speech, Godongwana announced that VAT would increase by 0.5% in 2025/2026, followed by another 0.5% increase the following year.

In addition, personal income tax brackets remained unchanged for the third consecutive year.

By not adjusting for inflation, individual taxpayers will effectively pay more tax in real terms, leading to diminished purchasing power across the board.

Independent Analyst Khaya Sithole mentioned on The Money Show with Stephen Grootes that the sectors where individuals may earn this kind of money without paying tax are likely those where economic activity is not easily traceable and economic activity operates outside of formal transactional systems.

This could be, for example, a nightclub where people are able to trade alcohol without necessarily being registered through the system.

However, Sithole said that the “bigger fish” involves cases where a transaction involves a South African asset that is conducted through offshore entities and currencies.

For instance, if two people set up bank accounts in Mauritius and agree to a property sale in South Africa, they can complete the transaction offshore.

The only local record might be a simple ownership acknowledgement, avoiding scrutiny from South African authorities.

If authorities can’t scrutinise the transaction, they can’t value it, he said. “If they can’t value it, they can’t tax it.”

Sithole stressed that this R7.5 billion allocated in the 2025 Budget is a necessary investment into SARS.

He explained that initially, funding focused on rebuilding its capacity, essentially restoring it to where it was before former SARS commissioner Tom Moyane’s tenure.

Now, the focus has shifted to optimising the tax system, since there are concerns that a significant amount of tax revenue is being lost.

Kieswetter has estimated that SARS is missing as much as R800 billion in unpaid taxes.

Even if only a fraction of that is true – or can be collected – that will still offer a significant boost to the government’s coffers.

In addition, Sithole explained that the cost of tax collection has been decreasing, which likely means that SARS is becoming more efficient.

However, if it doesn’t receive additional funding, the taxman may see its efficiency start to decline.

“We need to find the right balance between the amount of resources allocated to them and the taxes that they collect,” he added.