Rich taxpayers flooding out of South Africa
Eunomix chief economist Claude de Baissac has warned that South Africa is facing a growth collapse and that the country is too dependent on tax revenue from rich citizens, who are leaving in droves.
Eunomix tracks the performance of 190 countries on a range of metrics and forecasts what will happen over the next five years.
Speaking on Kaya Biz, De Baissac said their forecast for South Africa has been very accurate over the last five years and predicted the decline the country is experiencing.
South Africa is suffering from high unemployment, slow economic growth, and a flight of skilled, high-net-worth individuals.
“South Africa is facing a growth collapse. It is one of the worst-performing countries in the world across economic indicators, social health, security, and quality of life,” he said.
The failing state, riddled with corruption and financial mismanagement, places enormous pressure on a small group of individual taxpayers who must carry an undue burden.
Wealthy and middle-class South Africans are paying taxes for services like education and healthcare, which they do not receive from the state.
These wealthy South Africans are opting out of the South African economy because it is structurally hollow and on the verge of collapse.
De Baissac said the exodus includes skilled and wealthy individuals, capital moving to other countries, and providers of goods and services limiting local operations.
He highlighted that a large part of personal income tax comes from higher-income earners and that working-class taxpayers are disappearing.
National Treasury’s latest data revealed that South Africa has 7.4 million individuals with taxable income. Of this group, only 1.4 million pay 71% of all income tax.
Even more concerning is that 133,230 wealthy individuals account for 29% of all personal income tax.
Compare this small tax base with the 29 million South Africans who receive monthly government grants, and it is easy to see why economists warn it is unsustainable.
De Baissac added that the tax base is not growing enough for the state to meet its obligations, which is creating a dangerous situation.