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BUDGET 2021: What Budget 2021 has in store for “the wealthy”

Last Updated Feb 2021

Johannesburg, 26 February 2021 – Minister of Finance, Tito Mboweni, delivered his 2021 Budget Speech on Wednesday, 24 February 2021. While the news for taxpayers was generally good, with more than inflationary adjustment to personal income tax rates and a 1% reduction in corporate income tax for tax years starting on or after 1 April 2022, there were some indications that life could soon become more difficult for “the wealthy”, writes Patricia Williams, tax partner at Bowmans and SAICA Tax Administration Act committee member.

Restricting tax deductions

According to the Budget documentation, the progressivity of our tax system “will be enhanced by restricting deductions for the wealthy”. It is unclear which tax deductions are considered to be “for the wealthy”.

One tax deduction that has already been capped for higher income taxpayers is retirement contributions. An amendment from 1 March 2016 introduced a “cap” on tax deductions for retirement fund contributions of R350 000. Given that the tax deduction was based on 27.5% of relevant income, this potentially impacted taxpayers earning over R1.27 million per year.

Differentiating between taxpayers does not automatically comprise discrimination, and unlawful discrimination in particular. This is not to say that it may not feel that way to persons who are the recipients of the differentiation. The “wealthy” are certainly being specifically identified for higher effective taxation.


SARS is in the process of establishing a dedicated unit to focus on “individuals with wealth and complex financial arrangements”. According to Minister of Finance, the “first group” of taxpayers have been identified and will receive communication during April 2021.

If this “first group” were politicians and politically connected persons, in respect of whom there have been numerous public calls for “lifestyle audits”, this announcement may be very well received within the market. Absent this, it will simply cause frustration.

There is a general consensus that improving the audit capacity at SARS would be a positive development. The issue is that SARS’ tendency to audit “easy targets”, and argue about “timing differences” (seeking to shift a tax deduction into a subsequent year), is very frustrating when taxpayers feel that SARS should be “catching the criminals”.

Tax evaders are the ones who SARS should be dedicating the most effort to catching. There is indeed a need for SARS to audit taxpayers who have filed their returns properly, with all relevant supporting documentation, and where a potential tax dispute relates to legal interpretation of complex tax provisions; but these taxpayers should be treated with respect, and not feel that they are being unfairly targeted for their wealth, higher income, or because they are perceived to be “soft targets”. All taxpayers should know that SARS is spending significant time and effort in curbing tax evasion.

Wealth tax is being considered

SARS is going to use third-party information to consolidate “wealth data” for taxpayers. This will be used to assess the feasibility of a wealth tax (as well as for audit purposes, as discussed above). In the circumstances, if taxpayers were celebrating the absence of heavier taxes on “the wealthy”, this celebration may be short-lived.


Given the very small pool of higher income taxpayers, the sizeable contribution that these taxpayers make to the tax collections for the whole country, and the economic mobility of many of these taxpayers, it may be beneficial to carefully consider the message that Budget 2021 is sending to this group. Many of those who fall within this group would feel comforted, if reassured that the intention is to focus on people who have failed to properly file their returns and pay their taxes, or those with asset levels that are inconsistent with their declared earnings.


The South African Institute of Chartered Accountants (SAICA), South Africa’s pre-eminent accountancy body, is widely recognised as one of the world’s leading accounting institutes. The Institute provides a wide range of support services to more than 50 000 members and associates who are chartered accountants (CAs[SA]), as well as associate general accountants (AGAs[SA]) and accounting technicians (ATs[SA]), who hold positions as CEOs, MDs, board directors, business owners, chief financial officers, auditors and leaders in every sphere of commerce and industry, and who play a significant role in the nation’s highly dynamic business sector and economic development.

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