One of the most popular debates in the South African financial world is the question of taxpayers – how many South Africans actually pay tax?
Why is the Number of Taxpayers So Important?
South Africa’s public finances are funded by a small pool of taxpayers – the most common figure puts the number of South Africans paying income tax at around 5 million. Because of the government’s priorities, including welfare and spending on development and social services, commentators are concerned that the country’s relatively small tax base will not be able to sustain government spending forever. Another concern is that as government spending increases, the rate of taxation may increase along with other taxes such as the fuel levy.
The Two Major Types of Tax – VAT and Income Tax
Although the number of South Africans who pay Income Tax is relatively small, some experts have argued that the large number of people who pay VAT (practically every South African who buys products and services) make a large contribution to the government’s budget.
According to this theory, as the economy continues to grow the number of VAT payers will increase because people who earn below the tax threshold will still be consuming goods and services. However, on closer inspection it seems that the bulk of VAT may be paid by the same people who pay income tax.
How Many People Pay Most of the Tax?
With an estimated 6.2 million taxpayers, it would seem that South Africa’s tax base is growing comfortably. However, since less than 5 million of these registered taxpayers actually paid tax, the figures soon start to appear smaller than meets the eye.
According to a recent article by the Solidarity Research Institute, 2.9 million taxpayers contributed 99% of the country’s Income Tax, a tiny fraction of the country’s population and a group of people who are likely to be taxed more heavily as government spending is increased over the next few years.