The shrinking PIT tax base. What’s next?

So what can be done to turn this situation around?

The quickest intervention to boost the supply of individual taxpayers is to simply import more skilled workers. Visas for skilled foreign workers should be encouraged and expedited. Fast-tracking the employment of foreign workers will benefit the economy for several reasons: (i) it will ease an immediate constraint and will allow businesses to grow, (ii) skilled foreign workers will create jobs directly for other South Africans; and, perhaps most crucially, (iii) South Africans working with these individuals will learn global knowledge and best practices in their respective industries.

We also need to encourage South Africans based overseas to come home. When South Africans return, following the siren-call of family and culture, they bring with them knowledge, experience and access to global markets which can be leveraged to start and grow local businesses. Beyond the “softer” lifestyle aspects, we need to create a viable business case for South Africans to return and this can only be achieved through a growing and vibrant economy.

In the medium to long-term, a growing economy is the most significant factor when it comes to sustainably growing PIT collections.  The IMF, in its most recent Article IV consultation, has found that implementing the economic reform and fiscal consolidation agenda could result in South Africa’s GDP growth reaching 3.6% by 2025, compared with their baseline view of 1.4%. Consequently, this would reduce South Africa’s fiscal deficit from -8.3% of GDP in 2021 to -1.8% of GDP by 2025. There is no way getting around the difficult decisions and hard work needed to drive the economy forward.