South African taxpayers brace for a R16 billion tax fleecing
That pay raise you were looking forward to might not be the bed of roses you thought it was. South African taxpayers are set to lose out big.
South African taxpayers will be R16-billion lighter in their pockets by the end of 2024, thanks to the Finance Minister not adjusting personal income tax brackets for inflation. According to a report from Daily Investor, tax specialist at BDO, Beatrie Gouws, believes the government will ‘rake in the money’ over the next three years.
Otherwise referred to as ‘silent’ or ‘stealth’ tax, ‘bracket creep’ happens when tax deductions are not adjusted for inflation. As the workforce receives annual increases and/or promotions, they earn more money, end up in a higher tax bracket and therefore get taxed more. The end result is greater personal income tax revenue for SARS with zero rate hikes.
SOUTH AFRICAN TAXPAYERS LOSE OUT
However, everywhere else the government is accounting for inflation. South African Social Security Agency grants will increase by 4.8% in 2024 to adjust for inflation and cost of living. Likewise, South Africans living near the poverty line will receive a 5.7% increase to the Social Relief of Distress Grant.
Moreover, the latter is disbursed to 8.5-million people, costing R22 billion per month. Social welfare is the third-highest expenditure by the National Treasury. First is paying off interest on national debt, second is basic education, and third is social welfare.
INCREASE THE TAX BASE
So, while South African taxpayers may have breathed a sigh of relief when no personal income tax rate hikes were announced, the country’s workforce will still end up out of pocket. R16 billion extra in the 2024/25 fiscal year, R17.3 billion in 2025/2026 and R18.6 billion in 2026/2027. It may seem like small potatoes compared to the country’s R1.8-trillion budget, but the problem is South Africa’s small tax base which urgently needs to expand.
High-income South African taxpayers – roughly 5% of the population – pay around 92% of all personal income tax. The government is trying to squeeze more and more revenue from fewer people each year. Last year South African had 7.4-million individual taxpayers, while this year that figure decreased to just 7.1 million. The country’s registered taxpayers are declining, while government expenditure (and debt) is only increasing. We need that relationship to shift in the opposite direction.
What do you think of the plight of South African taxpayers? Be sure to share your thoughts with our audience in the comments section below. And don’t forget to follow us @TheSANews on X and The South African on Facebook for the latest updates.