Emigration affecting SA’s tax revenue collection

The country’s tax revenue is being threatened by rising emigration. And tax collection is likely to fall as some South Africans choose to leave the country and withdraw their pension funds and investments.

The high unemployment rate as well as marginally low salaries are also having a negative impact on revenue collection.

About 6 000 South Africans emigrated from the country last year in search of better job prospects in other countries. And some are highly skilled individuals who contribute immensely to the country’s tax revenue.

The country’s slow economic growth as well as electricity shortages are believed to be some of the reasons pushing residents to emigrate.

And a proposed wealth tax is expected to also drive people out of the country as they try to avoid a high tax burden.

Only about 16 million people are registered for income tax in South Africa.

And analysts believe that this number is likely to dwindle if more taxpayers leave the country.

Associate Director at Delloite, Maggie Ntombela says, “It’s not only the wealthy people, but it’s also the graduate. If they leave the country how are we going to collect taxes in the future.”

The newly implemented Expat Tax law for 2022 and 2023 dictates that from March 2022 the first  R1.25 million earned in foreign income is exempt from tax in South Africa.

Some emigrants have opted to cease tax residency in South Africa to avoid any further tax obligations here even if they are required to pay an existing levy.

Ntombela says this is likely to deal a heavy blow to the country’s tax base.

Analysts are hopeful that Finance Minister Enoch Godongwana will not implement any income tax increases when he tables his maiden budget on the 23rd of February as this could further burden taxpayers and exacerbate the rate of emigration.