WHY the South African tax base needs to expand in 2024

Following February’s budget speech, it’s clear that the South African tax base needs to be urgently expanded. The list of factors throttling the economy may look almost insurmountable. However, all of them would be eased if the South African tax base was larger.


Finance Minister Enoch Godongwana delivers the February budget speech. Image: @ParliamentofRSA

Firstly, we know the National Treasury’s biggest national expenditure is the servicing of debt. Out of every R100 spent by the government, R16.13 goes to paying off debt. Next is R13.70 for basic education. And, rounding out the top three, is R12.59 for social welfare.

Furthermore, the South African Social Security Agency delivers 28-million grants per month. And yet, this is funded by a mere 7-million taxpayers. Likewise, at last count, South Africa’s informal economy was booming. Spaza shops and entrepreneurial ventures in the townships are not paying tax at all. This weakens the tax base further.


South African tax base
If more small businesses knew their tax rights they would not work informally and shrink the South African tax base. Image: File

Experts say South Africa doesn’t have debt problem; we have an income problem. And despite the fact we spend roughly R1 billion per day on servicing and refinancing our national debt, expanding the South African tax base would generate more income.

According to a story from Business Tech, in partnership with Xero South Africa, more small business owners should understand tax better and be incentivised into the South African tax base.

Overall, SARS tax revenue increased from R1.28 billion, pre-COVID-19 pandemic in 2018/19, to R1.68 billion in 2022/23. And that’s with a large number of small businesses not reporting their taxable income. Therefore, 67.1% of all Company Income Tax (CIT) was paid by just 432 companies.


This photo of a Spaza shop is used for illustrative purposes. Image: Gallo Images / The Times / David Harrison

Furthermore, Xero South Africa says Small Business Corporation (SBC) compliance remains very low. Just 160 000 companies were registered for SBC in 2022/23. Ironically, companies not registered to SBC are missing out on the benefits of paying less tax through the scheme.

Moreover, better education from SARS on the different types of tax would benefit small business owners. Xero South Africa’s research shows 64% of small businesses want government to invest in digital skills. Doing so would boost tax compliance, create healthier businesses and bring more money into the economy.

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Do you agree the South African tax base needs to grow? Be sure to share your thoughts with our audience in the comments section below. And don’t forget to follow us @TheSANews on X and The South African on Facebook for the latest updates.


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