Reports from the latest annual tax statistics for 2024 indicate that the South African Revenue Service (SARS) has reportedly lost R3 billion in collectable taxes following the departure of 38,000 taxpayers who ended their tax residency in South Africa.
BusinessTech SA reports that these individuals declared their non-residency status, significantly impacting SARS’s ability to collect revenue.
Analyzing their taxable income and tax liability over ten years highlights the substantial loss incurred due to these changes in residency.
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South Africa’s reliance on taxes
Like other countries, South Africa relies on taxes to fund critical government operations, essential services, social programs, and economic development, making taxation crucial for the nation’s stability and growth.
According to the OECD, South Africa’s tax-to-GDP ratio in 2022 was 27.1%, exceeding the 2024 average of 16.0% for 36 African countries by 11.1 percentage points.
The average for African countries rose from 14.9% in 2013 to 16.0% in 2022, while South Africa’s ratio increased from 24.8% to 27.1% in the same period.
South Africa’s highest recorded tax-to-GDP ratio since 2000 was 27.1% in 2022, with the lowest at 20.1% in 2000.
A significant portion of South Africa’s revenue comes from personal income tax (PIT), corporate income tax (CIT), and value-added tax (VAT).
Personal income tax, in particular, accounts for the largest share of tax revenue, given the country’s progressive tax system.
SA residency and the tax system
Tax residency differs from nationality, permanent residence, or citizenship and does not directly reflect migration numbers.
South Africans can be citizens while holding tax residency elsewhere, but assets left behind may still incur tax obligations in South Africa.
Changing tax residency requires formal declaration to SARS, while emigration or citizenship changes are handled by Home Affairs.
Regardless, shifting tax residency or emigrating from South Africa results in significant lost tax revenue, prompting SARS to caution against a permanent depletion of the country’s tax base.
However, non-residents remain taxed on South African-sourced income.
A look at the SARS tax data from 2014 shows that 44,693 taxpayers declared a taxable income of R21.6 billion, of which the tax collectable was R6.2 billion.
The number of assessed taxpayers fell to 37,584 in the 2023 tax year, a 15.9% decline, with taxable income dropping to R9.9 billion and tax payable decreasing by 49.3% to R3.2 billion.
Although the South African government lacks concrete data on the emigration status of its citizens, tax records provide a key indicator of this movement.
In 2023, SARS Commissioner, Edward Kieswetter acknowledged that thousands of taxpayers had emigrated, with over 6,000 individuals leaving the country in the previous year.
Overall, the number of South Africans ending their tax residency appears to be declining, although it has increased compared to 2023.
Experts suggest that this decline may be because many wealthy individuals have already severed their tax ties, leaving fewer high-income earners who can make the change.
Another factor could be the shifting demographics, with younger and middle-class taxpayers increasingly opting to cut ties with SARS.
