The latest annual tax statistics for 2024 have revealed a concerning trend for the South African Revenue Service (SARS). According to reports, SARS has suffered a significant loss of R3 billion in collectable taxes due to the departure of 38,000 taxpayers who decided to end their tax residency in South Africa. This departure has had a major impact on SARS’s revenue collection efforts, highlighting the importance of tax compliance for the country’s financial stability.
BusinessTech SA reported that these individuals formally declared their non-residency status, signaling a clear shift in their tax obligations away from South Africa. The analysis of their taxable income and tax liability over the past decade paints a stark picture of the substantial loss incurred by SARS as a result of these changes in residency.
South Africa, like many other countries, heavily relies on taxes to fund essential government operations, social programs, and economic development. Taxation plays a crucial role in ensuring the nation’s stability and growth. According to the OECD, South Africa’s tax-to-GDP ratio in 2022 was 27.1%, exceeding the average of 16.0% for 36 African countries in 2024 by a significant margin of 11.1 percentage points. This underscores the importance of tax revenue for the country’s financial health.
Personal income tax (PIT), corporate income tax (CIT), and value-added tax (VAT) contribute significantly to South Africa’s revenue stream. Personal income tax, in particular, accounts for the largest share of tax revenue, reflecting the country’s progressive tax system.
Tax residency in South Africa is a complex issue that differs from nationality, permanent residence, or citizenship. Changing tax residency requires a formal declaration to SARS, while emigration or citizenship changes are handled by the Department of Home Affairs. It is crucial to note that non-residents are still taxed on South African-sourced income, even if they have shifted their tax residency elsewhere.
The decline in the number of South Africans ending their tax residency may be attributed to various factors, including the departure of many high-income individuals who have already severed their tax ties with the country. Additionally, shifting demographics, with younger and middle-class taxpayers opting to cut ties with SARS, may also play a role in this trend.
Overall, the loss of tax revenue due to taxpayers ending their residency in South Africa serves as a reminder of the importance of tax compliance and the need for effective revenue collection strategies. SARS continues to monitor these trends closely to prevent a permanent depletion of the country’s tax base and ensure financial sustainability for the future.
