Tue, 09 Mar 2021

  • For every high-net worth person who immigrates, an average of R1.2 million in income taxes disappears from the system and the spending, value-added tax and economic activity they generate is also lost,

  • Fewer than 14 million South Africans in the working-age population of 39 million are registered taxpayers and those earning more than R1 million a year pay 40.2% of all personal income levies.
  • The small tax base is a symptom of South Africa's extreme inequality, a legacy of the apartheid.

South Africa's loss of skilled and high earners could limit room to raise income taxes as the Treasury seeks to plug a budget shortfall that's above wartime levels.

A fourth-quarter estate agent survey by FirstRand Ltd.'s First National Bank shows a more than fifth of all houses valued at R2.6 million ($176,939) or more that were put on the market by the end of last year was because people planned to move abroad.

The small tax base is a symptom of South Africa's extreme inequality, a legacy of the apartheid system of racial discrimination that disadvantaged the Black majority and ended in 1994. Today, chief executives and top lawyers make as much as R20 million a year while the official minimum wage is just over R20 an hour.

High-income South Africans are finding homes abroad through residency and citizenship programs. A family of four must donate $200,000 or invest $320,000, including administration fees, in a government approved real-estate project to qualify to become citizens in the Caribbean island nation of Grenada, which is very popular at the moment, said Nadia Read Thaele, founder and managing director of LIO Global, a residency and citizenship consultancy.

A wealth tax has been mooted several times in the past 2 1/2 decades to boost the standard of living of the country's poor. Last year, an advisory panel appointed by President Cyril Ramaphosa said a three-year "solidarity tax" that would raise income tax for higher earners should be considered.

The government should rather enforce laws aimed at bolstering tax compliance and invest in rebuilding capacity at the South African Revenue Service, according to Nazrien Kader, head of tax at Old Mutual Ltd. A commission found the body suffered a "massive failure of governance and integrity" under former head Tom Moyane from 2014. Edward Kieswetter, the former chief executive officer of the country's largest insurance and retirement-fund adviser Alexander Forbes, was appointed commissioner in 2019.

Source: News24

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