Many wealthy taxpayers leaving SA

Increasingly high taxes are forcing many wealthy taxpayers to leave South Africa and, after the Budget 2024, they will scrutinise the fine print of tax legislation and consider the possibility of the introduction of National Health Insurance, while weighing the implications for their financial portfolios and long-term wealth accumulation strategies, to decide if it is worth to stick around.

Tax director Beatrie Gouws and tax partner at BDO Prof David Warneke said top-tier taxpayers have historically borne the brunt of tax hikes and policy changes aimed at redistributing wealth and bolstering social programmes.

However, in recent years, Warneke pointed out, there has been a growing sentiment of discontent among high-income earners, who argue that excessive taxation stifles entrepreneurship and undermines economic growth.

Another growing concern for the health of the economy is the number of top earners who are simply choosing to emigrate, due to – among many other reasons – increasingly high taxes, he said.

According to the 2024 Brics Wealth Report, many super wealthy individuals are leaving SA. The report highlighted that the country was home to 37 400 dollar millionaires, including 102 centi-millionaires and five billionaires, at the end of 2023, a 20% decline from 2013.

Gouws said this means SA has lost about 9 350 dollar millionaires over the past 10 years, although this is also due to the devaluation of the rand against the dollar over this period.

Tax statistics from the SA Revenue Service also show that over 32 000 people ended their tax residency in the country between 2017 and 2021. About 2 700 of them earned more than R500 000 and 1 100 earned more than R1 million annually.

“If an increasing number of SA’s richest people leave the country, the number of the relatively few taxpayers who pay tax will decline. This includes South Africans who have been living outside the country for many years who, if they cease their South African tax residency, will no longer pay tax in the country on income earned from a non-South African source,” Warneke said.

Although the Budget 2024 was hailed as a solid budget that showed fiscal consolidation as well as fiscal discipline, some budget delineation, particularly regarding taxes, will affect South Africans from across the spectrum of income brackets.

From the affluent to the struggling masses, every level of society will be affected by the allocations and adjustments Finance Minister Enoch Godongwana announced.