South Africans Facing Record Tax Pressure

South African taxpayers are facing record tax pressure, with Finance Minister Enoch Godongwana confirming that the country’s tax-to-GDP ratio is at its highest level since democracy. This indicates that a growing share of the economy is being collected in taxes, adding to the financial strain already felt by households and businesses amid rising costs.

Key Takeaways

• Record tax burden on taxpayers: South Africa’s tax-to-GDP ratio is at its highest level on record, meaning households and businesses are contributing a larger share of economic output to the state than at any time in the democratic era.
• Pressure driven by a narrow tax base: A relatively small group of taxpayers carries most of the burden, increasing strain on middle- and higher-income earners and making government revenue more vulnerable to economic slowdowns.
• Limited room for future tax hikes: With taxes already high, the government faces difficult choices between expanding the tax base, improving compliance, or resorting to indirect measures to fund rising spending needs.

Parliamentary Scrutiny of Tax Sustainability and Revenue Strategy

These details were provided in a formal response to a parliamentary question submitted by African Transformation Movement Member of Parliament Vuyolwethu Zungula, who requested clarity on the sustainability of current tax levels and the government’s longer-term plans for revenue collection.

The questions focused on whether South Africa’s reliance on taxation at current levels can be maintained without damaging economic growth, and what steps the National Treasury intends to take to stabilise revenue over the next five years.

Tax-to-GDP Ratio at Historic Highs

In his response, the finance minister acknowledged that South Africa’s tax-to-GDP ratio stood at 25.1 percent, a figure that represents both a historical peak for the country and a high level by international standards, including when compared to economies of a similar scale and structure.

He indicated that this ratio highlights a structural weakness in the current tax system, where a relatively small number of taxpayers are responsible for funding a significant portion of government expenditure. This concentration increases vulnerability when economic conditions weaken or employment levels decline.

According to the minister, the most effective long-term solution for securing government revenue lies in expanding the tax base. By increasing the number of economically active taxpayers, it becomes possible to reduce reliance on high rates applied to a narrow group.

At present, however, South Africa continues to depend on elevated taxes imposed on a limited pool of contributors, a situation that complicates fiscal policy choices and constrains government flexibility.

Understanding South Africa’s Overall Tax Burden

The tax-to-GDP ratio serves as a broad measure of how much of a country’s economic output is transferred to the state through taxation during a given period.

It provides insight into the overall tax effort of a government and is widely used as a benchmarking tool to assess fiscal capacity and economic structure across different countries.

International bodies such as the International Monetary Fund, the World Bank, the Organisation for Economic Co-operation and Development, and the African Tax Administration Forum regularly apply this metric when evaluating tax systems and comparing economic performance.

For the 2024/25 fiscal year, South Africa’s tax-to-GDP ratio was measured at 25.1 percent, the most recent data point currently available.

Figures published in the 2024 Tax Statistics report, jointly produced by South African Revenue Service and the National Treasury, confirm that this level is the highest recorded since the 1994/95 fiscal year.

The data show that the ratio increased by 1.4 percentage points between 2019/20 and 2024/25, rising from 23.7 percent to its current level.

The minister noted that this upward trend was broadly consistent over the period, with the exception of a sharp decline in 2020/21, when the COVID-19 pandemic severely disrupted economic activity and reduced tax collections.

Heavy Reliance on Income and Corporate Taxes

Beyond the headline ratio, the minister emphasised that South Africa’s reliance on personal and corporate income taxes is particularly high when viewed in a global context.

He pointed out that the country shares similarities with developed economies such as Denmark, New Zealand, and Norway in its heavy dependence on taxes levied on individual incomes, corporate profits, and capital gains.

South Africa records a notably high contribution from personal income tax relative to GDP, combined with a top marginal tax rate that exceeds those found in many other developing economies.

In addition, the corporate tax burden as a share of GDP ranks among the highest worldwide, further highlighting the pressure placed on formal businesses.

By contrast, South Africa’s value-added tax rate remains comparatively low when measured against peer countries, and VAT is widely regarded as an efficient and reliable source of public revenue. This efficiency explains why the government sought to draw on VAT during the 2025 budget process, despite the political and social resistance that ultimately prevented such increases from being implemented.

Conclusion

South Africa’s record-high tax burden highlights the growing tension between the state’s spending needs and the capacity of taxpayers to carry further increases. With a narrow tax base and heavy reliance on personal and corporate taxes, revenue collection has become increasingly sensitive to economic conditions, leaving little room for direct tax hikes without risking further strain on households and businesses. Improving growth, expanding the number of active taxpayers, and strengthening efficient tax administration will be critical if government is to stabilise revenue in the coming years without deepening the pressure on those already contributing the most.