The state of taxation in South Africa

Stiaan Klue, CEO of the South African Institute of Tax Practioners, presents his opinion on the current – and future – state of taxes in South Africa.

Death and taxes may be inevitable but they shouldn't be related. In South Africa the extent of individual taxes and related hidden costs is putting immense pressure on individuals and might just kill them - financially, that is. With the poor healthcare system in South Africa, this may just become a reality!

Currently, 25% of individual taxpayers pay 75% of all personal income tax, which contributes close to 30% of total revenue to the fiscus. That is massive in anybody's terms and needs. Individual taxpayers are also subject to value added tax (VAT), capital gains tax (CGT), donations tax, estate duty, transfer duties and un-certificated securities tax (UST), just to name a few. That takes individuals’ contribution way above 60% - which equals to more than half of their annual personal consumption spending.

The bad news is that Pravin Gordhan warned in the Medium Term Budget Policy Statement that South Africans may see tax increases in the near future and in addition, a separate tax is to be imposed on taxpayers to fund the development of broadcasting and the cash-strapped South African Broadcasting Corporation (SABC).

Although the net individual tax rate in South Africa is quite high compared to international standards, the real issue is value for money and how effectively taxes money is spent – i.e. what taxpayers are actually getting back. The Netherlands, for example, might have a higher marginal tax rate but it provides first-class retirement benefits and an excellent, free healthcare system.

The recent public outcry on the proposed additional “SABC tax” made it clear that South African taxpayers are starting to ask questions about their tax burden and the way in which their contribution to South Africa is managed. This will certainly put pressure on President Zuma to increase the value proposition for South African taxpayers. The wise Jean Baptiste once said:

“The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing.”

Yours truly
Stiaan Klue

Chief Executive
The South African Institute of Tax Practioners