Personal income tax accounts for about 40 per cent of total tax revenue. In response to extreme levels of inequality, South Africa’s rate structure is highly progressive and covers tax residents’ worldwide income. South Africa has the highest personal income tax share among upper middle-income countries, alongside one of the highest top personal income tax rates.
Personal income tax rate increases are often advocated when higher revenues are needed. Over the past six years, these taxes have been adjusted upwards five times to raise more revenue. Recent increases include the introduction of a new top rate of 45 per cent in 2017, and below-inflation adjustments in the brackets and rebates for a number of years. Further increases in personal income taxes would put additional pressure on households that have been negatively affected by the pandemic and undermine the chance of a stronger economic recovery. There is no compelling case for increasing these rates at this time. Instead government aims to reduce the rate over time by increasing the tax base through greater economic growth, employment and enforcement.
Below is a table reflecting Personal Income tax rates and bracket adjustments: