Ageing taxpayers prop up SA’s shrinking tax base

South Africa’s tax receipts are increasingly concentrated among older cohorts and a handful of large firms, exposing the fiscus to demographic risk as a generation of young people struggles to find well-paying work.

Data from the South African Revenue Service (Sars) shows that about 1.7-million people assessed in the 2024/25 financial year were above the age of 55, with a taxable income of nearly R700bn.

This comes as the country wrestles with a narrowing tax base — with just 7.7-million people assessed for tax in the year under review — and escalating social grant commitments.

The data show that taxpayers aged 55 and over made up 22% of personal filers in 2024 and paid about 27% of the total assessed personal taxes in the period.

This age group, with a taxable income of R690bn, was assessed for R149.5bn, a significant chunk of the R563.3bn of the personal income taxes Sars collected in the year.

The data also reveals a concerning soft underbelly of South Africa’s youth unemployment crisis, with the few who are employed not earning enough to assist the tax base.

For those aged 18 to 34, who constitute 2.3-million of the assessed taxpayers, their tax contribution came in at R76bn, with a taxable income of R493bn.

This supports data from Stats SA, which shows that young people aged 15 to 34 make up about 50.2% of the country’s working-age population, translating to about 20.9-million individuals.

The challenges facing young South Africans in the employment space are not new, but they are trending negatively in many cases. Over the past decade, youth unemployment has remained persistently high.

Deepening the crisis is that about 3.5-million young people aged 15-24 were not in employment, education, or training, and about 1.9-million out of 3.5-million discouraged work-seekers were young people aged 15-34 in the third quarter of last year, according to Stats SA.

Avias Ngwenya, the in-house economist at corporate law firm Nortons, said the ageing taxpayer base, combined with high youth unemployment, presents a material risk to the fiscus.

“This is a similar risk in the context of medical schemes where [there are] very few new younger joiners. These figures also reflect the significant youth unemployment challenge in South Africa, which sits above 60%,” Ngwenya told Business Day.

“In terms of risk for the fiscus, as older and significantly better paid members of the population enter retirement, this will put a significant dent into the ability to generate income tax.”

In terms of risk for the fiscus, as older and significantly better paid members of the population enter retirement, this will put a significant dent into the ability to generate income tax.

—  Avias Ngwenya, in-house economist at corporate law firm Nortons

A large chunk of the tax base is supported by the taxpayers in the 35-54 age bracket. The age group constitutes about 3.6-million people, with a taxable income of R1.5-trillion and an assessed tax of R336bn, nearly 60% of the total tax base.

Taken together, the adult population accounts for 69.2% of the tax base, with those in the youthful ranks representing the rest — despite making up the bulk of the population.

The figure goes higher when looking at the assessed tax for the period under review, with the adult population constituting 86.3% of the taxes collected.

The small tax base also has another big challenge down the road: the inability to save enough for retirement, with just 6% of the workers on course to retire comfortably, according to pension industry data.

The data put pressure on policymakers to speed up reforms and grow the economy to absorb the millions of young people languishing at home, cementing South Africa’s unwanted reputation as the “most unequal” society in the world.

Personal income tax is the largest contributor to taxes in South Africa.

Education fault line

The narrowing tax base also reveals another fault line in South Africa’s economy: the hefty investment into education is not translating to meaningful jobs for young people.

This is despite South Africa’s substantial education budget, nearing R300bn annually — a figure that suggests the country is not underspending on basic education in particular, but rather that there are quality and efficiency issues in the system.

The fiscus is also relying heavily on just 600 companies for its corporate income tax (CIT) haul. About 1.2-million companies were assessed for tax in the period, with just 21.7% of these declaring a taxable income in a constrained economic environment.

In its latest tax statistics document, Sars said: “The concentrated nature of the South African economy is evident in that only 630 large companies (0.2% of the companies with positive taxable income) each had taxable income of more than R200m and were liable for 59.6% of the CIT assessed.”