20/03/25

SOUTH AFRICA: South Africa’s secret millionaires exposed in shocking tax scandal

As published on: capetownetc.com, Thursday 20 March, 2025.

As the South African government works to improve its tax system, a startling revelation has come to light: around 100 000 individuals earning over R1 million annually are not registered for tax.

This estimate, shared by SARS Commissioner Edward Kieswetter, has raised concerns about the growing number of affluent South Africans avoiding their tax obligations.

Finance Minister Enoch Godongwana’s 12 March budget speech outlined plans to allocate R7.5 billion to SARS, aiming to enhance its operations and tackle tax compliance issues. Although SARS has not disclosed the exact methodology behind the 100 000 estimate, experts speculate that it could be based on tracking the spending habits of high-income earners in the country.

Jashwin Baijoo, an Associate Director at Tax Consulting SA, revealed that SARS has identified over 156 000 individuals who, despite engaging in significant economic activities, are either not registered or have failed to file tax returns. This is a serious issue, as a small percentage of South Africans shoulder the majority of the country’s tax burden.

The Daily Investor has reported that in the 2023/24 fiscal year, personal income tax (PIT) accounted for a substantial portion of the country’s R2.2 trillion in gross tax revenue. However, just 1.6 million people—2.6% of the population—are responsible for paying 76.2% of this tax. Meanwhile, around 30 million South Africans rely on social grants, highlighting the imbalance in the country’s financial system.

Despite being financially capable, the failure of some individuals to contribute their fair share of taxes has placed even more strain on the law-abiding taxpayers, who many experts argue are already burdened by high taxes.

Godongwana’s 2025 Budget speech also introduced a VAT increase of 0.5% in 2025/2026, followed by another hike the next year. Additionally, personal income tax brackets remained the same for the third year in a row, meaning that inflation-adjusted incomes will result in higher real tax burdens for individuals.

Khaya Sithole, an independent analyst, suggested that the source of untaxed wealth could lie in industries where financial transactions are less transparent or operate outside formal systems, such as nightclubs or offshore property deals. He explained that when assets are transferred through offshore entities, the transactions can often bypass South African tax authorities, making it difficult to track or value the deals, and thereby avoiding taxation.

Sithole emphasised that the R7.5 billion earmarked for SARS is crucial for modernizing the service and enhancing its ability to collect taxes. He pointed out that previous funding was directed toward rebuilding SARS after the damage caused by former commissioner Tom Moyane. Now, the focus is shifting toward optimizing the tax system to recover lost revenue.

Kieswetter has estimated that SARS is missing as much as R800 billion in unpaid taxes. Even if only a portion of this amount can be recovered, it would provide a significant boost to the country’s finances.

As SARS becomes more efficient at tax collection, Sithole warned that without continued investment, the agency’s progress may stagnate. Striking the right balance between resources and revenue collection is essential to ensuring the sustainability of South Africa’s tax system.

Tags

South Africa Tax scandal Tax evasion