JOHANNESBURG - Experts warn that South Africa’s shrinking tax base is becoming a growing risk.
Pan-African Investment and Research Services CEO Iraj Abedian says the problem is manifesting in multiple ways – from government struggling to raise required funds and resorting to increased borrowing, to high-earning taxpayers leaving the country.
Abedian warns that this is not only affecting personal income tax, but also business tax revenue.
“New enterprises, the growth of the company base, which is the growth of the tax base by non-individuals, is also either stagnant or shrinking,” he said.
He says this trend has been observed over the past 15 years.
It raises the question : How does South Africa create more entrepreneurs, particularly large-scale business owners who can contribute significantly to the tax base while also creating employment?
Abedian says the matter is complex.
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He points to crumbling infrastructure, corruption and poor governance which undermine economic growth.
“The big issue is incompetence and corruption. It’s like a cancer spreading over the destruction of national infrastructure and urban infrastructure,” he said.
Adding to this is the country’s inability to attract and retain foreign investors. Geopolitical tensions exacerbate this lack of investment.
Abedian says there is a need for the country to go back to the drawing board.