South Africa’s personal income tax system is in the spotlight as the country’s tax filing season gets under way. Personal income tax is an important way of redistributing income from higher-earning to less-well-off individuals.
But how effectively does it do this and what can get in the way?
At the heart of any redistributive tax system is its structure: which incomes are taxed or exempted, which expenses are tax deductible, how the tax rate schedule is designed, and which tax credits are granted, including how much they reduce the tax owed. The schedule translates taxable income into the taxpayers’ tax liability by defining tax rates by tax brackets. The top tax rate is 45%.
