In February 2021, the South African Revenue Service (Sars) set up high wealth individual taxpayer segment to assess assets “derived from multiple sources”.
According to a PwC survey, the majority of South African corporate taxpayers (47%) believe that the division and its renewed focus on high income individuals will assist in closing the tax gap.
Some 36% of the 159 respondents believe that it wouldn’t narrow the gap, while 16% said it would “somewhat” assist Sars to close the tax gap.
High levels of tax on the rich are a difficult issue in South Africa. The country has a population of around 66 million people, but according to PwC, in 2019/20, there were 22 million registered taxpayers.
Only some 6.3 million people were expected to submit tax returns, which is around 9.5% of the population. The bulk of the tax was paid by 1.6 million people, less than 2.5% of the population.
Paul Roper, director at VG, said to International Adviser: “It is easy to say that the efforts of South Africa’s Sars high net worth tax unit will result in a narrowing of the tax gap.
“That may be so, but it is an over-simplification of the position. There is a particularly vexed situation in South Africa, as the size of the tax-paying base relative to the size of the total population is small; and diminishing.
“Simply increasing tax on the rich and using the Sars unit to this end may not be the optimal solution. Indeed, this may work in Sars’ disfavour as more taxpayers will simply leave the country indicating that much more thought needs to go into this.”