R450 Billion Tax Gap Leaves Parties Divided On Solution

South Africa's growing tax gap is raising concerns throughout the country as many in the financial sector suggest tax hikes to combat this issue met with contention, this solution does not appear to be the correct one.

PwC a renowned company providing professional services across audit, assurance, advisory and tax, estimates that South Africas tax gap ranges from R400 billion to R450 billion per year. This estimate is based on various studies of different tax segments and the illicit economy, particularly in sectors like alcohol and tobacco.

A tax gap this large is frightening and being able to close it by even 10 could mean an extra R40 billion or R45 billion of revenue available for the government, which could mean a lesser chance of tax percentile hikes.

A percentile hike proposed by finance minister Enoch Godongwana proposed an increase in tax of a minimal 1 to be implemented over two years. This increase would generate an additional R43.3 billion in tax revenue.

This proposal has been met with contention those who are for this tax increase and others fervently against it.