Each year around Budget time, attention turns to how South Africa funds its public spending and without question the narrative resurfaces of a small percentage of taxpayers footing a disproportionate share of personal income tax (PIT).

The 2025 Budget once again confirmed that this concentration remains a defining feature of the country’s tax system.

According to National Treasury’s 2025 Budget documents, 12.5% of individual taxpayers earning more than R750 000 per year contribute close to 60% of personal income tax (PIT). This equates to approximately 980 000 taxpayers out of the 26-million individuals registered for PIT.

While not all registered individuals are required to pay income tax, particularly those below the tax threshold, the figures highlight the extent to which personal income tax revenue depends on a narrow segment of higher-earning taxpayers.

The concentration intensifies at the upper end of the income scale. Taxpayers earning R1.5-million or more per year account for 32.7% of PIT payable yet represent only 2.9% of assessed taxpayers.

Personal income tax remains the largest source of tax revenue, contributing 39.5% of total tax collections in 2024/25, according to the latest Tax Statistics 2025.

Broadening the Tax Base Remains a Policy Objective, not a Crisis Response

Expanding South Africa’s tax base has been part of South African Revenue Service (Sars) objectives for the past few years.

Sars’ Strategic Plan 2025/26–2029/30 is clear on how the tax authority positions itself to win the ‘must-win battels’ which include:

• broaden the tax base; 
• improve voluntary compliance and fiscal citizenship; and
• use resources intelligently to achieve more with less;

Following Budget 3.0 in May 2025, Sars confirmed that it will, in the current financial year, broaden the tax base by systematically identifying and registering individuals and businesses that have previously operated outside the formal tax system.

Minister of Finance Enoch Godongwana has repeatedly stated that growing the tax base and improving the administrative efficiency of Sars will allow government over time, to spread the tax burden more evenly and equitably.

This commitment was reaffirmed in the 2025 Budget documents, which note: “Government remains committed to broadening the tax base and improving tax administration to support sustainable revenue collection and economic growth.”

During a visit to the Sars National Command Centre in Brooklyn on 5 February 2026, President Cyril Ramaphosa acknowledged Sars’ efforts and aim to expand the tax base, improving voluntary compliance and fiscal citizenship.

The Silent Challenges That Can Erode the Tax Base

The President stressed that despite early signs of economic recovery, difficult times prevail, impacting tax collection. “Revenue collection is more challenging, both domestically and globally. Slower economic growth and higher living costs are squeezing the tax base,” he told Sars officials during his visit.

High unemployment, particularly among younger South Africans, limits the expansion of the tax base through PAYE, a significant revenue stream for Sars. With overall unemployment at 31.9%, and youth unemployment at approximately 40%, fewer individuals enter the formal tax net despite being of working age.

While the number of registered taxpayers itself is not shrinking, its composition raises important policy considerations. 

Market commentators have long been warning that over-reliance on a relatively small group of wealthy individuals, including ageing taxpayers and mobile high earners who emigrate to pursue a new life abroad, exposes revenue collection to economic volatility and behavioural responses.

The 2025 Tax Statistics bulletin shows that between the 2017 and 2024 tax years, more than 51 500 individuals formally declared that they had ceased to be South African tax residents. Over the last four years, South Africans between the ages of 18 and 44 years made up an average of 61% of the taxpayers leaving the country and formally severing tax ties with Sars each year.

Sars noted that this removes a highly productive segment from the country’s tax base every year.

The Tax Statistics also show an ageing but compliant segment of the tax base. In 2023 more than 470 000 South Africans taxpayers with a taxable income of R154-billion were 66 years and older. By 2024 this figure had increased to 512 346 taxpayers with a taxable income of R186-billion, clearly demonstrating a high reliance on a big ageing tax base. 

Source: Stats SA, Tax Contributions by Age Group (2024/2025)

Sars Will Enforce Compliance to Protect the Revenue Base

Against this backdrop, Sars has made it clear that protecting the existing tax base is as important as expanding it.

The net revenue estimate for the current financial year stands at approximately R2-trillion and Sars has reiterated that its mandate is anchored on revenue collection, compliance enhancement and the facilitation of legitimate trade. “By dutifully implementing its compliance programme, Sars is well positioned to collect all revenue due to the fiscus,” it stated.

This enforcement focus extends beyond South Africa’s borders. A common misconception among expatriates who left South Africa is that physically leaving the country automatically ends their South African tax obligations. Unless a taxpayer has formally ceased South African tax residency – whether permanently or temporarily – Sars continues to regard them as taxable on their worldwide income, regardless of how long they have lived abroad.

Why Tax Residency Status Can Not Be Ignored

Ensuring that Sars has the correct tax residency status on record is critical. This responsibility ultimately rests with the taxpayer. 

As long as Sars’ records reflect an individual as a South African tax resident, that taxpayer remains subject to South African tax on their worldwide income. 

For South Africans working or living abroad, unresolved residency status can result in unintended tax exposure, penalties, and interest, often many years after departure. These risks are amplified by increased data sharing, the use of artificial intelligence and advanced skills and systems to enhance compliance.

Advice from an Expatriate Tax Specialist becomes essential when navigating the cessation of tax residency correctly, ensuring compliance with South African tax obligations on locally sourced income, while avoiding unnecessary taxation of foreign earnings.

Written by Chrispos Seete, Sars Tax Compliance Specialist at Tax Consulting SA; and Asamkele Tyala, Expatriate Tax Support Specialist at Tax Consulting SA