As South Africa heads into Budget Week, many will be waiting to see what measures finance minister Tito Mboweni will put in place to battle the country’s growing budget deficit – and more specifically what tax changes are coming that will erode our monthly income.

While a whole host of tax changes have been floated by economists and analysts over the last few weeks, there is no doubt that citizens will pay more – with the wealthiest the hardest hit.

The finance minister and National Treasury will however, be acutely aware of where their bread is buttered when it comes to tax revenue, and will likely tread carefully when implementing any major changes so as not  to push an already stretched tax base over the Laffer curve.

Intellidex notes that the main source of revenue in the 2020 budget is likely to be raised through bracket creep – the non-adjustment of tax brackets for inflation.

This is an easy win for government because it’s not as obvious as a VAT hike, and also seems more “fair”, as it targets wealthier individuals. This could see R13.7 billion raised.

However, this multi-billion rand tax boost (which is expected to be the biggest income source on the revenue side of the budget) will be drawn from the vast minority of the country’s population.

Tax revenues in South Africa

In 2019, SARS assessed 4.9 million taxpayers, about 75% of the tax base, meaning around 6.5 million individuals pay all the income tax in the country.

Total tax revenue collected amounted to R1 287.7 billion, growing year-on-year by R71.2 billion (5.9%), mainly supported by Personal Income Tax (PIT) which grew by R30.9 billion (6.7%).

Personal Income Tax (PIT) at 38.3%, Corporate Income Tax (CIT) at 16.6% and Value-added Tax (VAT) at 25.2%, in aggregate remain the largest sources of tax revenue and comprise about 80.1% of total tax revenue collections.

In the 2018/19 financial year, SARS assessed R1.66 trillion in taxable income, which was R1.88 trillion before deductions.

The largest portion of this income (65%) is held by taxpayers who gross more than R29,000 a month (R350,000 a year), who ultimately paid over 83% of the country’s income tax in 2018/19.

However, this figure gets more disproportionate the more granular it goes – in-line with the country’s tax brackets, which sees anyone earning more than R1.5 million a year paying 45% of their income to government as tax.

While those earning over R5 million make up a small percentage of the assessed tax base (only 0.15% – or 6,600 people assessed), their income represents about 4% of the country’s total. Their taxes make up around 8% of the total collected.

Taxpayers earning over R1 million a year, represent 5.4% of the assessed tax base, and over a quarter (25.5%) of total income. This same group paid 37% of all assessed income tax in 2018/19.

In fact, around 800,000 assessed taxpayers paid more than two-thirds (67.6%) of all assessed income tax in 2018 – these are those individuals earning over R500,000 a year.

2019 Tax Assessment

Read: Here’s how much money South Africa’s richest 1% controls compared to the rest of the country