South Africa running out of taxpayers

South Africa’s tax base has declined over the past decade while the government’s tax revenue has grown enormously, spelling trouble for the government’s future funding.

Taxes comprise the largest portion of government revenue, with the National Treasury reporting R1.73 trillion in tax revenue for 2023/24 and R1.92 trillion in total revenue.

The government’s three most significant tax sources are:

• Personal income tax (PIT) – around 40% of government tax revenue
• Value-added tax (VAT) – 25% of government tax revenue
• Corporate income tax (PIT) – 16% of government revenue

Revenue from each of these tax sources has grown significantly in the ten years between 2014 and 2023. 

PIT revenue increased by 84% between 2014 and 2023, VAT revenue grew by over 70%, and CIT revenue increased by just under 63%.

In 2024, the National Treasury expects to bring in R1.86 trillion in tax revenue – R132.69 billion more than last year – despite the country’s shrinking tax base.

South Africa has a very small tax base that has been shrinking over the past decade.

In 2014, the country had 15.25 million taxpayers. The National Treasury reported only 14.24 million in 2024 – an almost 7% decrease.

One reason for this is that South African taxpayers are leaving the country in their thousands due to growing discontent about excessive taxation.

BDO tax specialists Beatrie Gouws and David Warneke recently explained that, historically, high-earning taxpayers have borne the brunt of tax hikes and policy changes to redistribute wealth and bolster social programs. 

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

This is concerning, as government revenue and expenditure have only grown over that time, meaning more money is being squeezed from a smaller base.

The 2024 Budget revealed that PIT will generate an estimated R739 billion in the current financial year.

In addition, the National Treasury’s individuals and taxable income for the 2024/25 financial year showed South Africa has 7.4 million personal income taxpayers.

Therefore, only 12% of South Africa’s population pays personal income tax.

However, it gets worse. The data further showed that only 862,000 people pay 58.7% of all personal income tax.

This means South Africa relies on only 1.4% of its population – less than 1 million people – to provide most of the money for education, healthcare, security, and social grants.

The situation looks even worse regarding corporate income tax, which is set to contribute R303 billion, or 16.2%, to tax revenue this year.

Renowned economist Dawie Roodt said 770 companies pay around 66% of all corporate income tax in South Africa.

Below is an overview of how tax revenue has grown compared to the relatively stagnant and recently shrinking tax base.