As South Africa grapples with a growing revenue shortfall, discussions around implementing a wealth tax have resurfaced, sparking renewed concerns among taxpayers, economists, and financial experts. The potential introduction of this tax has been linked to recent political shifts within the Government of National Unity (GNU), where coalition disagreements led to the unprecedented postponement of the 2025 budget.
A Shift in Strategy
Initially, the National Treasury proposed a two-percentage-point increase in VAT as a primary means to boost state coffers. However, pushback from coalition partners has led the government to consider alternative revenue sources, with a wealth tax emerging as a contentious possibility.
While the concept of a wealth tax has been floated for years, it has faced significant criticism. Experts warn that such a move could accelerate the emigration of high-net-worth individuals (HNWIs), shrink the tax base, and weaken investor confidence. The Davis Tax Committee previously emphasised that implementing a wealth tax requires a thorough evaluation of the country’s wealth distribution and administrative capacity. Without a well-defined tax base and comprehensive data, the economic impact could outweigh the revenue generated.
The Wealth Exodus: A Growing Trend
South Africa has already seen a notable departure of affluent taxpayers. According to the Henley Private Wealth Migration Report, the country ranks among the top 10 globally for projected net millionaire outflows in 2024, with an estimated 600 HNWIs expected to leave. Over the past five years, an estimated 40,000 South Africans have ceased their tax residency.
Many who relocate abroad formalize their financial emigration with the South African Revenue Service (SARS), ensuring their foreign-earned income remains outside of South Africa’s tax net. This trend is driven by concerns over rising tax burdens and policy uncertainty.
Understanding Tax Residency and Financial Emigration
Tax residency status plays a crucial role in determining a taxpayer’s liability in South Africa. For those considering financial emigration, proper planning is essential to avoid unforeseen tax obligations. Without a formal cessation of tax residency, individuals may still be liable for South African taxes, even while living abroad.
Non-tax residents benefit from several advantages, including:
- Being taxed only on South African-sourced income.
- Exemption from capital gains tax on foreign assets (except for fixed property and property-rich shares in SA).
- No worldwide income tax liability, even on funds sent back to South Africa.
- Exemption from donations and estate duty tax on foreign assets.
Looking Ahead: Will a Wealth Tax Become Reality?
Despite the speculation, National Treasury has yet to make a definitive decision on a wealth tax. In its latest budget discussions, Treasury confirmed that SARS is actively analysing wealth-related data through its High-Net-Worth Individuals Unit but has not reached a conclusion.
The coming months will be critical as the GNU finalises the long-delayed budget. With economic pressures mounting, taxpayers—especially HNWIs—should remain vigilant and proactive. Whether the government moves forward with a wealth tax or explores other revenue-generating measures, financial planning and tax compliance remain more important than ever.
For individuals considering financial emigration, now may be the time to reassess their options and take the necessary steps to protect their financial future amid ongoing uncertainty.
