South Africa’s corporate tax base is shockingly narrow, with just 1,051 companies contributing 72.3% of all corporate income tax. This small group of businesses plays a critical role in keeping the country’s economy afloat, highlighting both their importance and the risks associated with over-reliance on a handful of corporations.
The Heavy Burden on Large Corporations
According to Efficient Group Chief Economist Dawie Roodt, South Africa’s economy depends heavily on a tiny fraction of its businesses.
Government data shows that in the 2025/2026 financial year, corporate income tax is expected to generate R331 billion in state revenue. While this is a substantial amount, it lags behind personal income tax (R811 billion) and VAT (R500 billion).
However, the influence of these top corporations extends beyond just corporate tax payments:
- They are major employers, meaning their workers contribute significantly to personal income tax.
- Their employees’ spending generates huge VAT revenues for the government.
- Their continued investment and growth are vital for job creation and economic stability.
Without these 1,051 companies, South Africa’s economy would be in serious jeopardy, and social programs would be at risk due to lost tax revenue.
Why Raising Corporate Taxes Is Not the Solution
Amid ongoing budget shortfalls, some have proposed raising corporate tax rates on these profitable businesses to boost government revenue. However, Finance Minister Enoch Godongwana has warned that this approach could backfire.
“Increasing corporate or personal income tax rates would generate less revenue and harm investment, job creation, and economic growth,” said Godongwana.
There are clear reasons why increasing corporate taxes won’t work:
- Declining corporate tax collections – Companies have reported lower profits due to rising operational costs, logistics failures, and load-shedding.
- High tax burden compared to other countries – South Africa’s corporate tax rates are already higher than those of many peer economies, making it a less attractive destination for investors.
- Risk of capital flight – Raising taxes could drive companies to relocate operations or avoid expanding within South Africa, reducing long-term revenue.
Struggles of South Africa’s Largest Corporations
Even the country’s biggest businesses are under pressure. Many large corporations, especially mining companies, have been hit hard by:
- Unstable electricity supply (load-shedding)
- High production costs
- Logistics bottlenecks (affecting exports)
Godongwana acknowledged these challenges, stating that corporate tax collections have declined in recent years as companies struggle to maintain profitability in a worsening business environment.
The Danger of an Over-Reliant Tax Base
South Africa’s economy cannot afford to place such a heavy tax burden on just 0.09% of its companies. The more these companies struggle, the greater the risk to the entire tax system.
Roodt emphasized that the government must avoid further tax hikes, as businesses already face high tax rates compared to global competitors.
“If you raise corporate income tax, companies will leave, and they will not do business in South Africa,” Roodt warned.
What Needs to Change?
Rather than increasing corporate tax rates, the focus should be on expanding the tax base by:
- Encouraging entrepreneurship to grow the number of taxable businesses.
- Attracting foreign investment by improving business conditions.
- Enhancing infrastructure (electricity, transport) to help companies thrive.
South Africa’s corporate tax system is built on a dangerously narrow foundation, with just 1,051 companies shouldering the majority of the tax burden. While these businesses remain vital to the country’s economy, relying on them too heavily creates significant risks.
To ensure long-term economic stability, South Africa must shift its approach—focusing on business growth and investment rather than squeezing the same companies for more tax revenue.4
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