This is how long it will take South Africa to pay for government in 2023

Tax freedom day – the day after South Africa as a whole has earned enough money to pay for government – is expected to be on 14 May this year, two days later than last year’s prediction.

Tax freedom day representes the first day of the year in which the nation as a whole has theoretically earned enough income to pay its collective taxes.

Individually, this means that the average South African taxpayer has to work 133 days to pay for the government before they can start working for themselves.

According to Free Market Foundation statistician Garth Zietsman, the prediction is based on the intended level of tax collection for the central government mentioned in the Budget Speech.

“Typically, the actual figure – which is the general government revenue as a percentage of GDP from the Reserve Bank Quarterly – turns out to be 30% more than the intended figure for the central government,” he said.

Zietsman noted that, while the increase from 2022’s tax freedom day (12 May) seems relatively modest, it is higher than the long-term upward trend of 1.12 extra days per year, over the last 23 years.

“At the long-term rate of increase, each new generation can ‘look forward’ to an extra month working off the tax bill every year,” he said.

By international standards, South Africa’s tax burden is extremely high, Zitsman said, adding that it is among the worst for economies at its income level.

“There is plenty of evidence that a high tax burden both hampers economic growth and increases unemployment. The tax base is also very small, so the large tax burden falls very heavily on the few, and there is a very real risk that they will leave,” he said.

Zietsman said that there are many reasons why South Africa’s tax burden is so high. One major reason is the enormous number of state-owned enterprises in South Africa and the relative dysfunction and lack of productivity typical of people working within state bureaucracies everywhere.

“A far bigger factor, though, is the rampant corruption and criminality endemic to our state enterprises. Many of them need to be bailed out at considerable public expense on a regular basis,” he said.

Eskom, for example, has already been bailed out to the tune of R257 billion since 2008. In the latest budget, the government committed to pay off two-thirds of Eskom’s debt, or R282 billion.

“Together this is equivalent to 32% of this year’s entire budget,” he said. “Eskom is not an isolated case. Every other state-owned enterprise is also a hive of rackets that ends up being bailed out on a regular basis.”

Zietsman also pointed to South Africa’s massive social spending budget as another pressure point for taxes.

While social spending is needed, desirable and well-meant, “the scale of it is beyond the means of an economy with South Africa’s level of development,” he said.

“By diverting investment and hindering growth it condemns the poor to this dependency indefinitely – or put differently, social spending to some extent feeds people next year’s seed corn,” he said.

Who pays taxes in South Africa

The latest tax statistics from the South African Revenue Service (SARS) show that the country’s tax base is sitting around 6.4 million people in 2021, with most of the personal income tax concentrated at the top.

Only 17.9% of South African taxpayers earn over R500,000 a year, but make up 52% of all taxable income in the country.

According to SARS, Gauteng still accounts for the largest number of taxpayers, with 2,177,191 (39.5%) of assessed taxpayers registered in the province.

Over 726,600 of assessed taxpayers lived in the Johannesburg Metro and were taxed on an average taxable income of R446,739.

According to SARS, the number of individuals expected to submit income tax returns in 2021 dropped to 6.4 million due to the increase in the threshold for submission of returns over the past few years.

More recent years have seen the adoption of auto-assessments for taxpayers, which has boosted the number of taxpayers being assessed overall, however.

While the problem of emigration has been downplayed by the revenue service, commissioner Edward Kieswetter admitted that over 6,000 taxpayers had emigrated over the last year.

Read: South African businesses in a panic over emigration