Bracket creep has a significant cumulative burden on the average tax payer. Picture: Freepik
Image: Freepik
For the second year in a row, Finance Minister Enoch Godongwana opted not to adjust the personal income tax brackets for inflation in the 2025/26 tax year.
This has numerous implications in the short term, meaning many South Africans could end up financially worse off if their salary increase pushes them into a higher tax bracket.
But there is also an alarming long-term trend that has increased the burden on salaried South Africans over the past decade.
For 11 of the past 14 years, Treasury's tax bracket adjustments have fallen below the official inflation rate, according to the Organisation Undoing Tax Abuse (OUTA).
This means a middle-income South African earning R350,000 per year (R29,166 per month) has paid around R85,000 more in taxes, than what they would have, had the tax brackets been adjusted in line with inflation.
The average salary in South Africa currently stands at R28,231, according to the latest quarterly stats released by StatsSA.
"This is a stealth tax that Treasury has imposed by not adjusting tax-bracket increases to keep pace with inflation, thereby hitting the pockets of ordinary citizens while service delivery declines,” said OUTA CEO Wayne Duvenage.
The organisation has submitted a response to Parliament on its proposed 2025 Budget, strongly rejecting the highly controversial VAT increase as well as the freezing of personal income tax brackets.
The bracket freeze is expected to generate an additional R18 billion in revenue for Treasury.
Although the 2025 inflation rate is expected to fall around the 4.3% mark, tax specialist Tanya Tosen warns that the average employee will require a salary increase of more than 5% in order to maintain their current spending power.
Due to bracket creep, an individual earning around R30,000 per month will be hit with a tax increase of almost R4,200 per year if they receive an inflation-based 4.3% salary increase.
“If you’re expecting a pay raise this year, don’t assume it will automatically improve your financial situation. With unchanged tax brackets and rising costs, your salary increase may not go as far as you think,” warns Jerry Botha, Managing Partner at Tax Consulting SA.
“South Africans are being punished for government’s failure to address inefficiency and corruption,” OUTA's Duvenage said.
“We are overtaxed and under-serviced. Taxpayers have had enough of this abuse.”
The organisation said there are at least 100,000 individuals earning over R1 million per year who are not registered for tax. Bringing them into the tax net could generate an additional R100 billion.
Furthermore, National Treasury’s own GTAC spending reviews identified R36 billion in potential savings over three years by cutting programmes that deliver below-average social value. Cutting the number of public entities, which have increased from 100 to 279 since 1999, could also generate significant revenue savings, OUTA added.
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