BUSINESS NEWS - Only 5.8% of South Africa’s population is paying about 92% of all personal tax in the country, according to Econometrix chief economist and director Azar Jammine.
This portion of the population is also probably paying about 85% of all value-added tax (Vat) paid in the country, Jammine said on Friday.
His comments were made during a webinar hosted by cement producer AfriSam, on the outlook for South Africa’s economy in the context of the 2021 budget.
Jammine said South Africa has almost seven million taxpayers out of a population of 60 million, and the government is heavily reliant on upper-income taxpayers to fund its expenditure programmes.
He added that if a person receives a 5% salary increase in the coming year, their average tax rate and personal tax burden would hardly change in terms of the 2021 budget tax proposals.
Jammine said this is “a nice change” from previous years, when there was a progressive increase in the average tax rate and personal tax burden of individuals.
He said in the February 2020 budget the government planned to get R1.43 trillion in revenue and in October 2020 believed it would only get R1.1 trillion, but now believes it will get R1.21 trillion, an improvement of about R100 billion.
Jammine attributes this to higher mining profits and the skewness of income distribution and the tax burden in SA.
Covid-19 impact
His theory is that despite a lot of people having suffered as a result of Covid-19 and losing their jobs or experiencing a decline in their remuneration, the people who have suffered are not primarily the tax-paying commodity.
“Only a very small proportion of South Africans really account for a huge component of tax paid,” he said.
“They haven’t suffered the big declines in income that the poorer sections of society have, and are still paying their taxes. So I think this has taken the Treasury by surprise.”
Higher earners paying more and more
Jammine said the higher income parts of the economy have been ever more prominent in terms of paying taxes while the lower income parts of the economy are paying less and less tax.
He said middle class people earning between R20 000 and R40 000 a month have increased as a proportion of the number of taxpayers in the last five years, rising from 26% of all taxpayers to 33%.
“It’s a debilitating trend,” he said.
“The government has recognised this and seen that, proportionately, South Africa is up there with the highest tax-paying societies in the world and that if they were to increase personal taxes still further, it would start being counterproductive and that is why they were encouraged to avoid increasing taxes any further [in the 2021 budget].”
