South Africa’s real tax rate for middle-class households is 67%

The real tax rate for middle-class households in South Africa is approximately 67% if one considers the cost of private services as a substitute for inadequate government options.

Finance Minister Enoch Godongwana tabled his 2025 Budget on 21 May, which included increased personal income taxes through bracket creep.

It also raised “sin taxes” on alcohol and tobacco and increased the fuel levy, which means South Africans will pay more for petrol and diesel.

Although South Africa’s peak income tax rate remained 45% for those who earn above R1.817 million annually, people pay much more than that in real terms.

Stats SA revealed that South Africans are moving away from government services, for which they pay taxes, due to declining quality and poor availability.

This means that middle-class households in South Africa turn to private-sector alternatives, including private security, healthcare, and education.

Simply put, government services have become so poor that taxpayers are forced to pay for private alternatives to ensure they receive what they pay for.

Daily Investor analysed the total cost that South Africans pay in taxes and compensation for government incompetence. The private services include:

• Private security due to the high crime rate and poor police service.
• Private healthcare due to the poor quality of public healthcare.
• Private education due to the poor quality of many government schools.

The analysis assumed a single income of R1.5 million per year in a household with two parents and two children.

The R1.5 million annual salary will fall within the 41% tax bracket and would lead to a total income tax of R514,519 for the year.

We assumed that the two parents in the household drives 100km per business day on average, with cars that deliver 10km per litre of fuel.

R9.58 of every litre of fuel is comprised of different taxes, including a fuel levy, an RAF levy and a carbon tax. The total amount paid in fuel taxes for the year was R23,950.

We further assumed that the family lives in a R3 million property in Tshwane. This means they pay annual rates and taxes of R27,588.

The private school costs for the two children are around R5,000 per child per month, paid over 10 months. This translates into an annual cost of R100,000 for education.

The medical aid cost for a family of four, giving them access to private healthcare, is R239,088 per year. Most middle-class households use medical aids.

Private security is another standard service for South Africans who can afford it. An armed response plan costs approximately R700 per month, resulting in an annual expense of R8,400.

It was assumed that 80% of the remainder of the household’s income was consumed on other goods and services that carried value-added tax (VAT) tax.

This resulted in total VAT expenditure, beyond the expenses already considered, of R67,975 per year.

This means that the middle-class household paid R1,001,520 in direct taxes, and for private services to replace poor government options.

In simple terms, it means that many South African households pay 67% of their income in taxes and private services, which the government should deliver.

The table below provides an overview of the ‘true tax rate’ for a middle-class household in South Africa with an annual income of R1.5 million.