Business
South Africa’s tax shock is closer than we think and the pressure is mounting
The quiet problem building inside the tax system
There is a growing unease among economists and Treasury watchers, and it is not about a single new tax or a sudden Budget surprise. It is about who is actually paying for the country to function.
South Africa is edging towards a tax shock, not because people refuse to pay, but because too few people are able to. New figures from the South African Revenue Service show just how narrow the tax base has become and how heavily it leans on an older, shrinking group of earners.
On paper, millions of South Africans are registered for income tax. In reality, only a small fraction carries the bulk of the load.
Older taxpayers are carrying the country
In the 2024/25 tax year, about 1.7 million taxpayers assessed by SARS were over the age of 55. That group made up only 22 percent of assessed personal income tax filers, yet they contributed roughly 27 percent of all assessed personal income tax.
Collectively, they earned around R690 billion in taxable income and were assessed for nearly R150 billion in tax. That is a sizeable slice of the R563.3 billion collected from personal income tax overall.
This means a significant portion of state revenue is being funded by people approaching retirement or already planning for it. From a long-term sustainability point of view, that is a warning light.
Why younger South Africans are missing from the picture
Younger South Africans are not opting out of the system. They are largely locked out of it.
Taxpayers between the ages of 18 and 34 numbered about 2.3 million in the assessment data. Together, they generated R493 billion in taxable income and contributed only R76 billion in tax.
This is alarming when set against the broader population reality. According to Statistics South Africa, people aged 15 to 34 make up more than half of the country’s working-age population, around 20.9 million individuals.
High unemployment, low wages, and insecure work mean millions simply do not earn enough to contribute meaningfully to the fiscus, even if they want to.
A system carried by a tiny minority
The concentration becomes even starker when looking at the top end. SARS’s latest tax statistics show that just 2.4 percent of South Africans pay 77 percent of all personal income tax.
In real terms, about 1.5 million people contribute roughly R562 billion in personal income tax. This small group is effectively propping up the state.
While SARS has earned praise as one of the most effective public institutions, consistently meeting revenue targets, much of that success has come from tighter compliance rather than a growing pool of taxpayers.
Over the past 30 years, total tax collections have risen from R113.8 billion in 1994/95 to R1.9 trillion in 2024/25. That growth masks a deeper vulnerability underneath.
Why this model is not sustainable
Personal income tax remains the largest source of government revenue, accounting for 37.4 percent of total collections, or R729.9 billion. More than three-quarters of taxable income comes from salaries and wages.
Although over 27 million South Africans are registered for personal income tax, only 9.1 million are expected to submit returns, and just 7.7 million have their income formally assessed. Most registered taxpayers earn below the tax threshold and contribute nothing.
According to Professor Daniel Meyer from the University of Johannesburg, this imbalance is becoming increasingly untenable. Weak economic growth, stubbornly high unemployment, and the steady emigration of skilled professionals are shrinking the pool of taxpayers and putting fiscal stability at risk.
GDP growth is expected to sit at about 1.1 percent for 2024, far too low to create jobs at scale.
Emigration is quietly draining revenue
Another pressure point is emigration. Between 2017 and 2021, more than 32,000 individuals ceased tax residency, many of them earning over R500,000 a year.
In 2024 alone, an estimated 38,000 taxpayers left the country, translating into around R3 billion in lost revenue. The BRICS Wealth Report shows South Africa has lost about 20 percent of its millionaires over the past decade.
On social media, this trend often sparks heated debate, with some blaming tax rates and others pointing to safety, infrastructure, or service delivery. Whatever the motivation, the fiscal impact is real and measurable.
Spending pressures are moving in the opposite direction
While the taxpayer base narrows, government spending demands continue to rise. Social grant expenditure increased from R250.97 billion in 2023/24 to R266.21 billion in 2024/25. Debt servicing costs have climbed to R382 billion.
South Africa already has a tax-to-GDP ratio well above the African average. With fewer high earners and an ageing contributor base, there is limited room to squeeze more revenue without economic or political fallout.
The real risk ahead
The looming tax shock is not about an imminent tax hike. It is about a system stretched thin by structural unemployment, slow growth, and demographic change.
Unless job creation accelerates and more young people are pulled into sustainable, well-paying work, the pressure on the existing taxpayer base will intensify. That is when difficult choices, higher taxes, or deeper borrowing become harder to avoid.
For now, the warning signs are clear. The question is how long South Africa can ignore them.
Follow Joburg ETC on Facebook, Twitter, TikT
For more News in Johannesburg, visit joburgetc.com
Source: Business Tech
Featured Image: Daily Investor
