South Africa’s wealthy are escaping the tax net

Local tax experts say that wealthy South Africans are escaping the tax net amid a collapse in the South African Revenue Service’s (SARS) enforcement division. This is according to a report in the City Press, citing Judge Dennis Davis, chair of the Davis Tax Committee, and former SARS adviser, Yolisa Pikie, who it noted was part of a purge at the tax group. Both men were speaking at a conference on tax evasion and illicit financial flows organised by the Alternative Information Development Centre, a nongovernmental organisation, in Cape Town. Davis told delegates that the latest tax tables, published in the Budget Review, “make no sense”. City Press reported that approximately 103,000 people would fall into a new top wealthy tax category, citing Treasury.

“That makes no sense to me. There have to be more … I know more people on the Johannesburg Bar earning R5 million a year than the tax tables show,” said Davis. He said that affluent individuals are eluding the tax net. Pikie pinpointed the loss of expertise at the tax body. “What is not well known is that 80% of all corporate income tax comes from only about 400 companies,” said Pikie.

“The enforcement division has collapsed and some of us have been kicked to the kerb,” he said, as reported by City Press. Davis told delegates that while the revenue is down by R14 billion on personal income tax, it was not because of a slow economy as was suggested by SARS commissioner Tom Moyane, as corporate tax increased by R6.5 billion. “Tell me how that happens,” the tax expert said. The country’s tax tables were updated following the announcement of new tax changes for the 2017/18 financial year in February, by finance minister Pravin Gordhan. One of the biggest changes announced by the finance minister was the introduction of a new tax bracket, aimed at the country’s wealthy.

South Africans who earn more than R1.5 million a year will form part of a new tax bracket which will be taxed at 45%. Together these changes are expected to raise and additional R16.5 billion in tax revenue, which will cover a large bulk of the R28 billion shortfall.

This is how the new tax tables look:

Taxable income Tax rate
Under R189 880 18% of taxable income
R189 881 – R296 540 R34 178 + 26% of taxable income above R189 880
R296 541 – R410 460 R61 910 + 31% of taxable income above R296 540
R410 461 – R555 600 R97 225 + 36% of taxable income above R410 460
R555 601 – R708 310 R149 475 + 39% of taxable income above R555 600
R708 311 – R1 500 000 R209 032 + 41% of taxable income above R708 310
R1 500 001 and above R533 625 + 45%  of taxable income above R1 500 000

By Business Tech

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)