Remember SA’s stringent visa regime, which had the perverse effect of making it harder for visitors to enter the country? Topping that is the taxman’s recent proposal to tax SA residents on their worldwide income.
For many South Africans with one foot half out the door, this will create a powerful incentive to emigrate — and to do so at a time when SA needs to retain scarce skills more than ever.
Currently, any SA resident who spends 183 days a year working outside the country need not pay local tax. In future, if an SA resident pays only 20% income tax in a foreign country but earns enough to fall into SA’s top tax bracket of 45%, the SA Revenue Service will take the difference (25%).
With an estimated 50,000 South Africans working in the Middle East and hundreds of thousands resident in the UK and elsewhere, national treasury stands to make a killing.
SA expats working in low-or zero-tax destinations such as Dubai are aghast. They may see little option other than to return home. But for the best and brightest gaining valuable work experience in places such as London, where they already pay significant tax, it could serve as a final shove out the door.
If it does, the tax plan could end up costing the country more than it stands to gain.