South Africa: Born Free, Taxed To Death

Last Updated: 28 August 2012
Article by Oupa Magashula

Most Read Contributor in South Africa, November 2017

The burden on people paying income tax is becoming alarming.

Born free, taxed to death. Many SA taxpayers no doubt feel this is their fate. But they are probably unaware of just how burdened they really are by taxes in their various guises and a heavier burden almost certainly lying ahead.

A handful of registered taxpayers bear the main burden of direct taxation. Based on 2010 data, taxpayers earning over R400000/year constituted 8,8% of the then 6m registered taxpayers but paid 54,2% of total personal income tax (PIT), SA Revenue Service (Sars) commissioner Oupa Magashula told parliament's standing committee on finance in May. The 43,3% of taxpayers with annual incomes under R120000 contributed 3,9% of PIT.

Paul Joubert, a senior researcher at the Solidarity Research Institute, narrows the data down further. Based on 2010/2011 tax data, he estimates about 2,1m people paid 92% of all PIT and 1,4m paid 82% of all PIT.

In government's 2012/2013 fiscal year it aims to extract R286bn from the small personal tax base, 14,5% more than in 2011/2012 and 35,8% of total tax revenue. Tax collections from individuals to June 2012 indicate it will achieve its target but it is the next fiscal year and beyond that is raising concern among economists and tax experts.

National treasury's medium-term budget forecast indicates it will be looking for R326bn from PIT in 2013/2014, up R40bn (14,7%) on this year's estimate.

In 2014/2015 it will be looking to extract a further R49bn (15%) from income tax payers.

It will be a tall order, believes Rhodes University tax professor Matthew Lester. "GDP growth at 2,5% is not going to help much," says Lester. "Increases in remuneration in recent years have been above inflation but that tailwind is starting to lose momentum," he adds.

Treasury has already tapped heavily into another source of PIT over the past five years: fringe benefits. "All company fringe benefits to employees are by and large now taxed as if they were cash earnings," says Ernie Lai King, tax executive at Edward Nathan Sonnenbergs.

Despite Sars being equipped with increasingly tough investigative powers, its ability to sustain its exceptional record of closing the tax net is also questioned. "The low-lying fruit has been taken," says Lester. "Catching a few hundred tax evaders is great but it won't bring in the type of money they are looking for."

Echoing this view, economist Mike Schüssler says: "The golden era of higher and higher tax collections is behind us."

There are other ways to increase PIT revenue, including raising the 40% marginal tax rate. "It won't help much," says Lester. "There are too few taxpayers in the top income bracket."

In its hunt for extra revenue government is unlikely to raise the corporate tax rate. Projected growth in corporate tax in the 2013/2014 and 2014/2015 fiscal years of 9,2% and 10,4% respectively suggests it has no plan to do so.

The other major source of tax revenue, Vat, is an "untouchable holy cow", says Lester. "If [finance minister Pravin Gordhan] can get away without a personal tax rate increase next year it will be the result of masterful budgeting," he adds. Taking a similar view, Lai King says: "I think a tax rate increase will happen."

As ominously, Sanlam group economist Jac Laubscher says: "The tax rate is under upward pressure." Down the line, he adds, the "big gorilla" is national health insurance. "Government is vague on how it proposes to fund it."

A personal tax rate increase could be the last straw for many people in an economy where the average personal savings rate is already zero and unsecured consumer debt is rising at an alarmingly high 40% annual rate.

The tax burden also extends way beyond the obvious. Take Joe, who has an annual taxable income of R500000. Joe knows he pays 27% in income tax and 14% Vat on almost everything that he, his wife and son in matric buy. But he is probably unaware that at most these account for about two-thirds of the family's total tax burden.

One of the biggest tax takes is on Joe's transport bill. If he is an average Gauteng motorist he buys 140l of petrol a month, says Schüssler. In a year it adds up to over R5000 in fuel tax and levies. Less obvious are taxes on the car Joe bought for R180000. Vat and ad valorem duty on the car come to over R26000 and a CO² emission tax adds another R4500.

As a smoker (20 a day) Joe contributes almost R3800/year in excise duty. Two dozen beers, three bottles of spirits and four bottles of wine bought each month take his family's annual sin tax contribution to around R5500. Owning a modest house, Joe will also cough up about R9000/year in municipal taxes and at the average electricity usage rate for SA households, R460/year in electricity levies to the state.

Far more onerous are school fees. Joe's son at King Edward II, a government school, will cost just short of R28000 in fees in 2012. Arguably school fees are not a tax. But if Joe lived in the UK or Australia, for example, he would be paying no school fees. He would also be paying a lower tax rate - 22,3% in the UK and 18,9% in Australia - and have the benefit of a free state health service.

Joe's income is also burdened by many other taxes ranging from a 45% duty on clothes imported from the East to a tax on plastic bags. Throw in TV and car licences and a 15% dividend tax on a R100000 unit trust investment and he is parting with at least 43% (R213000) of his income in tax in its various forms. The percentage is probably far higher. Toll road fees, airport taxes, a bewildering array of import duties and once free government services now paid for are among those adding to the tax bill. The need for costly private home security is another form of tax, many would argue.

Against this background, Lai King takes strong issue with government. While praising Sars for its efficient tax collection, he stresses this is only one side of the equation. "There must also be vigour on the other [spending] side," says Lai King. "Government is not spending our money very well. There is huge wastage and billions of rand go unaccounted for."

Just how much money goes astray is indicated by the Special Investigating Unit's estimate that government loses R30bn/year through "financial leakage". More and more taxpayers are becoming "cheesed off" by the extravagance and inefficiency they see in government, says Schüssler. In the post-1994 era, he adds, taxpayers felt a strong moral obligation to pay tax to help build a new SA. "Most [taxpayers] still feel a moral obligation to pay but there are signs some are beginning to see things differently," he says.

One sign, Schüssler says, is the nonpayment of municipal rates and taxes. "Amounts outstanding to municipalities for more than 90 days now total R50bn," he says. Gauteng's controversial toll road fees provide another example of a mini tax revolt, with many motorists having said they would flatly refuse to pay.

"There is a big problem," says Lai King. There is a limit to how much tax can be extracted from the small number of taxpayers who pay the bulk of income tax, he warns.

Schssler fears a trend growing in which taxpayers no longer see nonpayment of tax as immoral. "It won't happen overnight," he says. "But there is a real danger that in 10 years' time the tax collection rate will not be as high as it is today."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers
The articles are extremely timely and highly applicable
I often find critical information not available elsewhere
As in-house counsel, Mondaqs service is of great value

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think youve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.coms content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltds services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with no disclosure in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a users hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friends name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a users personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that users personal data provided to us. This can usually be done at the Your Profile page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions