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5.8% of the population is paying about 92% of all personal tax

They are also paying about 85% of all Vat.
Government is heavily reliant on upper-income taxpayers to fund its expenditure programmes. Image: Mike Hutchings, Reuters

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.

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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].”

Investing less, consuming more

Jammine said one of the key structural impediments that has been weighing on South Africa’s economic growth over many years is the fact that the country has been investing less and less over time and consuming more and more.

“That is not a sustainable path for higher economic growth in the longer term,” he said.

“If you do not invest for the future, you will not be able produce the goods and services that the country needs to consume and eventually you will become totally dependent on imports and will not have a domestic productive capability.”

Jammine said Finance Minister Tito Mboweni spoke last year about ‘the yawning mouth of the hippopotamus’ and how government spending was surging but government revenue was falling and they had to do something ‘to close that mouth’.

Big move from government

He said the 2021 budget deliberately tried to do that by slashing government spending from over 30% of GDP to 26% of GDP, which “is unprecedented”.

Jammine said this was achieved by cutting back on public sector remuneration, with public servants receiving pay increases of not more than 2.1% next year, 0.9% the year thereafter and 0.5% the year after that.

“In the face of inflation of 4.5%, that means real declines in public sector remuneration of between 3% and 4% per annum in each of the next three years. That means the average public servant in three years’ time will have 10% less spending power than they have currently.

“That is totally justified because the cost of financing the public sector wage bill in South Africa is among the highest of any countries in the world.

“Only Denmark and Norway spend more in terms of their public service and I can guarantee you that the Danes and Norwegians get a lot more bang for their buck out of spending that money on their public servants than we do,” he said.

Jammine said this is “the real crunch” of the 2021 budget but questioned whether the government will be able to successfully persuade public sector trade unions to accept the real cuts in salaries that are necessary to try and fix the country’s fiscal situation.

“Without doing so, you will end in this situation where our debt-servicing costs increase progressively as a percentage of overall government spending, crowding out our ability to spend on vital social services,” he said.

The factors holding SA back

Jammine highlighted a number of structural impediments that have been holding back South Africa’s economic growth:

  • Corruption and state capture;
  • The deterioration in the efficiency of state-owned enterprises (SOEs) and their ability to run properly;
  • Investing less and less and consuming more and more;
  • Energy insecurity and load shedding, which negatively affects investor confidence;
  • The high cost of data and interconnectedness and the need to provide the broader community with greater access to the digital world;
  • Economic policy uncertainty, resulting from issues such as expropriation of property without compensation, nationalising the SA Reserve Bank, and the introduction at huge expense of a national health insurance scheme;
  • Massive overregulation and bureaucracy;
  • The undue power of the golden triangle, with too much power in the hands of government, big business and organised labour, resulting in small businesses not getting a look-in; and
  • The lack of capacity of the education system to improve South Africa’s technical capability and mathematical and scientific ability.
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One wonders how many people in the informal sector don’t pay income tax at all? Those that make more than the R83 000.00 threshold?
Maybe the lifestyle audit is not such a bad idea?

It was never a bad idea, this very ANC proposed it. They were going to be ‘transparent’ and ‘acoountable’ and ‘do everthing above board’. Remebmer all those high sounding lyrical waxing of comrades salivating after the chops of fattened cow that was the government the Nats raised? Remember when the rage of the day was ‘A Better Life for All’? Soon as they got into power, oh no there was no need now for Ministers to declare in public records what they ownwd and what business they were doing with government and or their relatives. You dont need a water-pas to deteremine that the life-syle of many politicians is out of whack with what they earn. If, you want to audt them, just ask Judge Willem Heath how it worked out for him? Ask the Hawks? So,audit ordinary people? We will soon be left with nothing but a carcass at this rate.

Now thats scary!

I’ve always maintained that if the Tax Payer alone had the vote, the ANC wouldn’t even garner 5% of votes

Proof that our tax pays for the unemployed who in turn put the criminals in power who in turn loot the fiscal and run the country into the ground

The Tax Base is shrinking due to a wholesale Exodus of Tax Payers…HKGK

Ironically, without the taxes of the 5,8%, Treasury wouldn’t be able to cover the oversized Wage Bill, let alone have a budget

One wonders how much of the 92% tax paid actually emanates from the minority group? That figure will never be exposed, but we know!

Despite that, the minority group is sidelined around every corner, be it with job creation or even so called transformation eloquently known as BEE

To illustrate, if Ii run a business and have 500 customers and one customer is responsible for 92% of my turnover, i would wrap him in cotton and look after him like gold!

You would think that would be the case?

Politics and looting in SA is more important than the well being of a nation

Despite the tax payer being the piggy bank, he has absolutely NO power

His financial power is transferred to a sick political dispensation by a voting system biased toward the unemployed masses! The same Government who are imposing more and more taxes on the goose that lays the golden egg and now policing their every move.

Government have approved R3 billion to assist SARS find the “evasive” ones.. Yet do not have a care in the world with the continuation and unabated corruption, neither care for our towns and cities who are begging for infrastructure investment and of course maintenance

Case in point..The rural towns are overrun with illegal immigrants, very few if any registered with SARS

Had they been registered, the 5,8% would probably double

Is SARS going after them, if not, why?

Is there a deal between our Government and theirs that we are not aware of? Some secret loan offset by sending their citizens to our country?

Well, if you look at Lesotho, Zambia, Angola, Namibia and SA, it looks pretty obvious!

SARS lost billions during the Alcohol and tobacco ban, including significant job losses

Guess where people were stocking up?

Certainly not from the Chain stores ie:Checkers,PnP, Makro, Spar, the law abiding Vat And Sins tax agents for SARS, employing millions

Even our “serve and protect” friends in blue and high ranking councillors were seen frequenting stores owned by “foreign” citizens , who are neither Vat compliant, not to mention registered tax payers..

they operate under the radar..If WE know and see this, why does SARS not act against them? They would rather follow you in your fancy car and start investigating your affairs, going back as far as 2016 than touch foreigners in our townships and rural towns

One has to beg the question, who supplied these stores with banned products, and they never ran out of stock!

He wants to eradicate corruption says Cyril, yet the Zondo commission have yet to put behind bars those implicated. Neither Cyril nor his faction have the political ability to lock up ANC cadres..He continues establishing more “commissions of inquiry” In fact, i think the so called “two factions” within the ANC is a smoke screen.. They’re “One for all and all for one”

Zuma was right when he said “the ANC will rule until the second coming” He knows the agenda of the ANC, more than we think..He will never see the inside of a cell

Mark my words, a Presidential pardon is on the cards, disqualifying the achievements of the Zondo commission, if we can call it that

I think the real issue is how it came to be that only 5.8% are in a position to be paying tax. What we need now is job creation going forward. Make SA a better place to live (safety), work (rule of law) and invest (policy certainty). I’m sure that most of the unemployed would love to be earning enough to pay taxes.

@jamesmcl

How it came to be is quite simple. Big business went the route of mechanizing, outsourcing or AI.. There is no assistance or incentives from Government to help SMME’s except ..

Case in point are the recent billions allocated to the Leisure industry (Guest houses and so forth) with the exclusion of the minority group who are retrenching in their droves..Doesn’t make sense?

Blaming the past is not the solution, and excluding all players in any industry much less!

The fact that only 5,8 % pays 94% of the tax can be laid squarely at the feet of the ANC

Is it now my fault that i’ve been sidelined and as a result become an entrepreneur?

The more they become stringent with BEE, so much more the minorities become self sufficient entrepreneurs, employing the very people under discusdion

Why are rural towns, yes and townships overrun with foreigners owning supermarkets and not our own people??

In fact, ironically enough, “our people” now work for foreigners in these stores

Take a drive to the South of Jhb to a place called “China City” and “China Mall”

I think that answers many questions about why 5.8%

Also how many of the 5.8% are civil servants because civil servants do not pay tax they recycle tax money paid by private companies and individuals.

Excellent article that gets to the point. We know what the problem is; an irresponsible Govt. who are oblivious to the mathematics of running a country. Those that can have left with their skills and abilities. We have a Govt. who has no idea how to plan for tomorrow, and are unwilling to accept the input from those in our society that still can do a good job.

The summary at the end of the article essentially says that South Africa’s problems are as a result of a criminal and failed ANC government.

This is politics. We have the same problem in a DA run municipality. They will not and refuse to accept any constructive input from highly qualified residents and continue to operate with unqualified, incompetent “management”

Conversely, 94.8% of the population is paying about 8% of all personal tax and 15% of all vat. What a fiscal catastrophe.

The government is squarely but not solely to blame for this. The primal perpetrators other than the government are the unions. They are infatuated by increments of remuneration for their members and yet, the corresponding level of productivity in the economy from their members lay in abstentia.
Because of this absence(productivity), the inherent value of the word ‘remunerate’ is expropriated through the incompetence of unions and is reduced down to ‘donate’. Employers(especially government) have been donating billions of Rands to sub-productive laborers.

Greater production output will yield higher fiscal revenue and reduce the embarrassing disparity between the size of the population and its tax-contributing proportion.

If you are basing this on the entire population of SA, I’m assuming that half the population included in this calculation are either too young to pay tax and/or are retirees. This on turn increases the percentage of real tax payers…so your story is not as dramatic as first thought!
In that case, the actual breakdown in reality is that about 12% of the population is paying about 92% of personal income tax. Still bad tho!
A bit of a shock for Mr Malema….who seems to imagine there is an unlimited supply of taxpayers who besides their taxes, can be robbed of their homes, cars and livelihoods to satisfy those who pay no personal tax! Although, I suspect his thinking does not stretch to this type of mathematics!
Just my opinion.

Since when do retirees not pay tax ?

There’s no age restriction on paying tax, no rebates for age.
Pensioners pay normal tax on pensions. A youngster who starts and runs a business is a taxable person.
Further, everyone who spends money (no matter how it’s gained) to buy hings pays VAT.

There is an increase in the rebate for those 65 years and older and a further increase for those 75 years and older. R 15714 for everyone, R 8613 for those 65 and older and R 2871 for those 75 and older. But yes, everyone who earns above the tax threshold is liable to pay income tax. I doubt that all do however, particularly the ANC politicians and their family on their ill gotten gains.

Yet a large part of this 5,8% are daily bombarded with accusations of creating “the most unequal society in the world” and how they are responsible for every conceivable inconvenience ever suffered by the 94,2% who don’t pay. The notion of paying reperations are even seriously advocated by people like Advocate Alexander Strachan and Prof Pierre de Vos. One thing is for sure, SA may be unequal but it is definitely the most distributive society in the world.

There was a recent article in Business Insider, 26 Feb, which says that if you have a net asset R2.7 million puts one in the 1% richest in SA.

Simply a solid mess that cannot be fixed by those that created it =
ANC government. Every day these clowns are allowed to inflict further damage to the country will extend the period it will take sane people to untangle the chaos.

I notice that Moneyweb articles always express Value Added Tax as ‘Vat’. Should this not be VAT?

Jammine is wholly correct in his analysis of who is paying the brunt of the taxes, and what the consequences of this trend are.

But is SILENT on what the root cause of this situation is.

The cause is NO mystery. At all!

What is the mystery is why Economists and the financial MEDIA in particular (I’m looking at you, MW!) positively REFUSE to admit to, let alone explore, why SA is doing NOTHING to ameliorate an unsustainable population growth amongst the poor.

One look at the graph of our population growth shows IMMEDIATELY this is our EXISTENTIAL problem !

If we vigorously attended to that problem, every single one of our societal problems would rapidly disappear over time.

Yet strangely, even though the problem and cause is in plain sight, there is a deliberate media attitude to suffocate discussion on this aspect.

And today we see the inevitable consequences of this denialism.

It is not a problem that is going to somehow miraculously vanish. Instead, it is getting steadily worse.

@Jonnox…isn’t that why they are rolling out the vaccine ??

A few years ago i complete a course in advance driving, the instructor made a very bold opening statement:
“Speed does not kill, it is stopping that does.”

Our economy has been on a decline for well over 12 years and continues to stagnate and regaress, knocking down the pillars of democracy on its way down to the point where rock bottom is an abyss of nothingness.

People spend money as quick as they earn it, because inflation has become a weekly consumer of value. Hence the reason for the very low savings rate…

The anc uses money printing to cover up their “Expropriation Through Inflation” which gives the illusion of an ever increase in growing GDP% however this highly missguided Keynesian Economics theory has all but removed Sound Monetary from revealing the truth.

https://www.heritage.org/index/ranking?version=501
In the above link, SA ranked at 106 is considered an Mostly Unfree country, we are 3 places behind China… Property rights has declined from 67.1 points to 58.8 and continues to go down further and further whilst the Chinese Property Rights increases.

The tipping point is 50 point mark and inline with countries like Argentina whose politicians and government are in a constant state of mistrust blame and default.

Totally agree, but the ANC have incentivised exactly the opposite, haven’t educated the masses on the unsustainability of having large families, and are unprepared to change a failing culture!!

Socialism really is working here. Now the “Gubment” wants to create 1 million more jobs AND THE GUBMENT IS BROKE??? And we all know how effective government employee’s are. They should not create jobs!! Let the private sector create jobs. 26 years later they still haven’t figured it out. SAD They took this beautiful country to it’s knees, all for T-shirts and food parcel elections.

Gubment must run the country so that the private sector can create jobs.

Jobs by gubment is just another vote creator for elections.

Yip, plus it is being stolen, and I am getting sick of it.

Imagine that, 5.8% keep this lot going, that is quite an achievement. Now just think if it was put to good use or the load spread a bit and taxes lowered, the jobs, the investment etc would be a world beater.

That is over way their heads to even comprehend let alone understand and implement…….

currently if tax could be calculated backwards: how much was it worth that the sa government has done for me as taxpayer in sa, then the percentage will be even lower – whilst nothing dramatically positive has ever taken place in the past 25 years, the anc is simply too corrupt / incompetent to reach a continues positive level – a flash in the pan once in a while is just not enough to get sa out of its anc created messed up state – anc and their mislead supporters learned absolutely nothing from the well known zimbabwean history.

LOL — Paying Tax is such an evil thing to do !!

100 000 taxpayers a year are leaving the country.

The tax base is diminishing and the population are increasing. Recipe for disaster.

We passed the point of no return around 2017/2018

And that 5.85% has to comply with the politicians elected by the 94%. Is this democracy? Ugh!

State-sanctioned extortion

At least the Finance Minister thanked all SA taxpayers for their contributions – that’s a breath of fresh air if nothing else.

One of M-Web’s journalists previously wrote an excellent article where she compared SA to Vietnam which I thought nailed it: The Vietnam government focuses on private sector entrepreneurship while the SA government focusses on politics. The results speak for themselves.

When any government anywhere in the world talks about creating jobs it is just political posturing to gain votes from those ignorant members of any society who expect handouts to sustain them. It’s simply not sustainable.

One also does not need to be a rocket scientist (or coding specialist) to be successful in one’s vocation. Discover what you enjoy doing (which only you can do), and work at it to create a business or service that creates a market for what you are offering. Jobs and Gates were University drop-outs when they created their companies. Believe in yourself and remember that the world is your oyster.

Well, there goes ‘the user pays’ principle they flaunted for E-tolls.

Just wondering whether Malema and his PhD colleagues – – aka numbskulls – – would understand this and the effect if they chase more taxpaying people away.

This is what they want. Look to Zim; Its the mines to crooked politicians are interested in.

It’d be interesting to hear where the stats for the 6% paying 85% of VAT comes from? That is not intuitive. Company VAT should be an enormous number as companies get no input VAT on payroll, leaving large net output VAT collection from companies?

I always imagined that higher VAT would spread the total tax base. The various fuel taxes and sin taxes are in effect the only broad base taxes then?

The end consumer effectively pays the VAT although the company acts as the unpaid “collection agent”. However, I agree that the source of the stat would be interesting to verify its veracity.

A testimony to the fact that BBBEE is a complete fantasy; the only thing we have under “black economic empowerment” is the political elite and their cronies robbing SA blind (and I’m sure not paying much tax on their illegitimate wealth). The ANC must be one of the worst governments in the world and a testimony to apartheid’s success to create blind loyalty to a (so called) liberation movement. A complete mess 80 years in the making.

and still they want to get rid of us…..?

More reason for the government to impose a solidarity tax soon, seeing the “wealthy” have not been as affect as the “poor.” Socialism dictates this must happen. Goodbye FDI.

My people arrived here in 1820. I’d say that would normally give us a right to be here, as immigrants are in the US? I pay R1m + tax a year to SARS. Yet message after message tells me and my family that we are not welcome here and that we are some sort of 3rd class citizens, or quasi-criminals for being white. ANC, your message has been heard loud and clear. I am exiting all my ZAR and intellectual capital and soon ourselves (6 degrees between us). I have no more staff, I just couldn’t be bothered, save for two delightful domestic staff. We’ve consistently funded poor kids schooling in various ways and helped many charities and kept impoverished families afloat. We’ve also supported small business via money and mentoring. This will end. We will never look back on the streets with raw sewerage, criminals roaming free and goats grazing in soccer stadiums. You wanted this, you’ve got it and now eat it. Zim 2.0

why would a person get up and go out to work everyday if they can sit up their backsides and
– demand free housing
– demand free electricity
– demand money to feed themselves
– mass produce children and demand that the tax payer takes care of
their children (child grants, free education, feeding schemes)

This government has created an entire nation of free loaders who would rather demand free stuff than get off their backsides and go out and earn a living.

The ANC government has deliberately done this in order to stay in power because it is these very people that vote for the ANC so that they will keep getting everything for nothing.

At least One has opened his eyes .. Our finance minister Tito. The others are still suffering a hangover from the 1994 party.

Can the experts please have a look at the tax Gini coefficient vs that of income and compare that with other countries. Given these numbers we probably have the largest disconnect in the world. Everyone is complaining about income inequality, but our tax inequality is never put into perspective, and least so by gubberment…

Then those seven million taxpayers should start a class action lawsuit against the ANC for state capture! Maybe it’s about time that these tax payers be the only one’s allowed to vote! But it’s too little too late because they are leaving these shores by the tens of thousands each month!

And we all know that the majority of those tax payers are the minority of this country!

careful – citing statistics is considered racist these days

As said so many times, South Africa is one the most unequal societies in the world. But whwat is often forgotten is that the “priveleged few” are in fact sponsoring the masses. Makes one thing different about inequality.

Taxation without representation..

= emigration.

At least everyone who buys in the shop pays vat on the product

The current average social grant is roughly R1100 per month. Lets argue that the majority of the people on social grants spend 70-80% on food, and basic items (let’s face it… R1100 doesn’t get you far these days). Perhaps transport can be included in expenditure, but I doubt taxi operators declare any income, let alone pay VAT. Even petrol is VAT exempt. We can assume that with such a low income, that staple goods are mainly purchased, as listed below. However, these items are VAT exempt (probably because so many people depend on it)

Below is a full list of all VAT-exempt items:

dried beans
samp
maize meal
rice
brown bread
vegetables
fruits
vegetable oil
mealie rice
pilchards in tins
edible legumes and pulses of leguminous plants
eggs
milk
dried mealies
dairy powder blend
lentils
cultured milk
milk powder
brown wheaten meal
sanitary pads
bread flour
cake flour

So, if anything, not a great deal of the monthly grants are being spent on VAT rated items (maybe on clothing and things like that)

When income increases, people tend to substitute goods with more expensive goods, but based on the current state of the economy, it’s highly unlikely at this point.

And many of those that pay taxes are constantly abused by the ANC regime of thugs that mis-manage the money from these taxpayers……….

End of comments.

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