Efficient Group chief economist Dawie Roodt said South Africa’s tax system does not suit a developing country. He said the small group of people and companies who pay most of the tax have passed their breaking point.
Roodt spoke at a presentation with Unicus Tax Specialists, held ahead of the Medium-Term Budget Policy Statement. He said the system is complex, costly and hard to comply with.
“The current tax system does not fit a developing country like South Africa. The tax mix is wrong. The burden is heavily skewed,” Roodt said.
He said the country is already past the best rate for personal income tax, company tax and VAT. “It undermines economic growth directly,” he said.
According to Roodt, a small number of companies and individuals pay most of the country’s tax. He said they get very little back from the state in return.
“The fiscus in South Africa is particularly redistributive. The expenditure is not benefiting the people who paid the taxes,” Roodt said.
He estimated that 30 million South Africans depend on the state for their monthly income. This number includes government workers, whose wages make up 17% of the country’s GDP.
Roodt said many taxpayers now arrange their affairs to pay less tax. He said they mostly do this by moving money offshore and by using trusts.
He said the high cost of compliance makes it worth paying for advice to cut their tax bill. As SARS takes more money from this group, those plans become even more attractive, he said.
“If you have some money to take out of the country, then you can legally structure your investments in a way that reduces your tax burden in South Africa,” Roodt said.
“Externalise your business if you can and move the head office to the Seychelles or Mauritius or wherever, because we are overtaxed here,” he said.
Roodt said the system is also hard for lower-income people who want to follow the rules. He said they get so little from the state that complying is not worth their time or money.
He said he would fix the system by making it simpler, not by cutting the total tax bill. “I will make it the easiest to comply with and the least complicated tax regime in the world,” Roodt said.
His first step would be to remove every exemption, deduction and rebate from personal income tax. People would then pay tax only on the income they earn.
“No deductions, no rebates, nothing. Simple and straightforward,” Roodt said.
He would also end the zero VAT rate on basic foods. These include brown bread, maize meal, fresh fruit, milk and eggs.
Roodt said these changes would ease the workload at SARS and make it easier for people and businesses to pay. He said this would raise more revenue without SARS having to be aggressive.
He said there would be no loopholes left to find. Paying for tax planning would no longer make financial sense, because simply complying would cost far less.
Source: this article is based on reporting by Daily Investor. Image: Daily Investor. Written with the help of AI and published by the Tzaneen Voice News desk. See our Editorial Standards.
Kgomotso Maake covers news and politics for Tzaneen Voice. Kgomotso reports on government, Parliament, municipalities, courts, crime and service delivery across South Africa, with a close eye on how national decisions reach towns like Tzaneen and the wider Limpopo province. Stories are written in plain English and focus on the facts: who made the decision, what it means, and what happens next.