The start of this year’s tax season comes amid reports that tax payers may have to pay even more from now on, while millions of taxpayers’ money is being stolen or wasted.
Just over 2.5 million people pay 84% of all personal income tax. Economists have long warned that the tax burden on a smaller number of individuals is getting heavier, with the economy not growing and many taxpayers leaving the country.
Many taxpayers are also in effect paying double as they have to obtain private services because the government does not provide the services for which tax money should be used. These include privatized security services and privatized medical services.
“Taxpayers have to watch every month how a large part of their hard-earned money is taken by the government and in return they get no or poor services while there are almost daily reports of how taxpayers’ money is stolen or wasted,” says Thys van Zyl, head of product development at Everest Wealth.
The government relies heavily on this small group of taxpayers and the answer is not to tax them more heavily but rather to increase the tax base by growing the economy. South Africa boasts one of the highest rates of personal income tax in the world. Talk of a wealth tax further scares taxpayers and will instead result in more people leaving the country. Furthermore, half of the population is dependent on social grants.
“South Africa lost more than 6 000 taxpayers to emigration last year. At least 400 of these were high-net-worth individuals, people with a net worth of more than $1 million. It is expected that a further 500 of these individuals may leave the country this year. These are people who pay huge amounts of tax that will now be lost.”
The possibility that taxpayers could be taxed even more heavily, such as for example to fund the government’s proposed National Health Insurance (NHI), will also result in more people considering options to leave the country. Presumably, this will also lead to an exodus of expertise, which will obviously reduce South Africa’s tax base even further.
South Africans are experiencing more and more financial pressure due to load shedding and rising living costs. “The high unemployment rate means that taxpayers have to bear an ever-heavier tax burden and become increasingly frustrated because they do not see value for their tax money.
“Instead of finding new ways to tax or to tax South Africans more heavily, there should be tax relief to stimulate economic growth.”