As a South African citizen, you are required to pay taxes on any income you earn. This revenue assists the government in proving infrastructure and services to the nation.
However, you may have wondered what would happen if you didn’t pay your taxes. We have a look at how income tax works, and we consider the consequences of non-payment.
Tip: Two things in life are certain: taxes and debt. Make sure your debt is taken care of.
How does income tax work?
South Africa makes use of a progressive tax regime, which aims to tax higher-income earners more than those who earn less.
To simplify, we’ll give an example that uses tax tiers that are well below the tax-free threshold. In reality, these figures are much higher, and they change annually based on the budget speech that the minister of finance delivers in February each year.
We will set our first tax tier at R1 - 100. If you made R100 this year, SARS would tax you 18% of your annual income, which equals R18. However, if you receive a raise and you now earn R200, this would place you in our second tax tier, R101 – 200. SARS would tax you 18% up to R100 (R36) and then 26% for the remaining money (R26), which equals R62.
In reality, for the 2021/22 tax year, the first tier is from R1 to R216,200. Have a look at the following chart to get an indication of the various income tax brackets from 2013/14 onwards.
READ MORE: Why tax evasion shouldn’t cross your mind
What if you don’t pay your taxes?
According to Danielle Luwes, tax manager at Hobbs Sinclair Incorporated, not filing your tax return can result in a penalty ranging from R250 to R16,000 for each month that you don’t comply.
“Furthermore, a new law in 2021 makes taxpayers liable for a criminal offense if they are non-compliant as a result of negligence,” says Luwes. “The penalty could also be a jail sentence of up to two years,” she adds.
If you’re new to income tax and you would like to enlist the help of a qualified tax practitioner, you should have a look at this guide on how to choose a tax practitioner you can trust.
However, it’s ultimately your responsibility to ensure you understand your tax liability. If you have any uncertainties, call SARS directly on 0800 00 7277, or visit their informative website.
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