SA Tax Problems

South Africa total budget for income tax is set at 588 billion for 2023. This is 38% of total budget which is far too high compared to first world countries. First world countries budget for income tax is under 30% of total budget. These first world countries have a large corporate and business tax base bringing in money to government and reason why this is lower than South Africa as they depend less on individual taxation. South Africa State enterprises like Eskom is an expense for the country instead of an income generating asset.

In 2021 the country had over 60 million citizens. From this South Africa have +-15 million (25%)  registered for tax.  From this only 7.5 million (50%) of individuals are actually paying tax. The reason for this a lot of individuals are earning under the annual threshold and exempted to pay tax.

12.5% OF THE  POPULATION IS RESPONSIBLE FOR 38% OF THE TOTAL GOVERNMENT BUDGET - INCOME TAX

If you are earning more than R750 000 per annum then you are within the 1% of earners in South Africa. There are only 608 000 tax paying individuals in South Africa earning more than R750 000 per annum. To put this into perspective more than 50% of all income tax in South Africa is payable by 1% of the population. The 1% is generally skilled workers and they are the individuals moving to other countries.

There are 300 000 Companies registered with CIPC in South Africa. From this less than a 1000 companies are contributing 65% of total corporate tax in South Africa.

915 000 INDIVIDUALS EMIGRATED FROM SOUTH AFRICA IN 2022 

Emigrations has increase significantly in South Africa from 2015. According to Statista a total of 915 000 individuals emigrated from South Africa in 2022 alone. Take note this is individuals which emigrated and not individuals who left the country working on permits abroad.

Source : Statista

Economic outlook and budget framework. Real GDP growth of 2.1 percent is projected for 2022. Over the next three years, GDP growth is expected to average 1.8 percent. Government debt has reached R4,3 trillion and is projected to rise to R5,4 trillion over the medium term. Debt-service costs are continuing to increase. This year, South Africa is budgeting to spend R301 billion on debt service costs alone. Roughly 19 cents out of every Rand collected will go towards servicing interest.

Source : PKF

BUSINESS LEADERSHIP SA COMMISSIONED A REPORT THAT SOUTH AFRICA HAS AN 85% PROBABILITY OF BEING PLACED ON THE GREY LIST

What happens to South Africa if we are Grey Listed

• GDP can fall anything between 1% - 3%. Note that the expected GDP growth forecast for the next 3 years are set at 1.8% on average.
• Doing business abroad will become extremely difficult but still possible with an enhanced due diligence implemented.
• Will be extremely difficult for South Africans to take capital offshore
• Often, countries being placed on the FATF’s grey list are followed by a blacklisting by the EU shortly after.  SA will likely also follow this route
• Dollar will reach R20 or higher against the dollar.

Source : Moneyweb | PKF

In summary the outlook for South Africa is looking  unstable and at this moment government is not giving any indication to rectify the  problems. 

At Securitas Winelands our first priority is too safeguard your assets

• Structure your assets correctly in South Africa and if possible abroad
• Ensure you don't have any assets in your personal capacity  to reduce your estate cost and future taxations
• Higher taxes are very likely in future and ensure your tax planning is aligned with your structured planning
• First rule of investing is to protect your assets, second rule is to always follow the first rule. Markets will be volatile for a while.
• Higher interest rates and inflation has a negative correlation with specific asset classes and positive outcome for other asset classes