The South African Revenue Service (SARS) expects to collect between R11 billion and R12bn in taxes from two-pot retirement savings withdrawals, which is significantly higher than the initial estimate of R5bn to R6bn, says Commissioner Edward Kieswetter.
He told an Allan Gray webinar this week that SARS has so far withheld just short of R11bn in tax on savings benefit withdrawals. In addition, SARS has issued directives for nearly a R1bn in other taxes owed by retirement fund members who withdraw from their savings components.
SARS said last week that about 2.4 million fund members have withdrawn more than R43bn from funds since the two-pot system was introduced on 1 September last year. This accounts for nearly 40% of the 6.5 million South Africans who contribute to retirement funds.
Kieswetter acknowledged that although this injection of funds has contributed to tax revenue – through spending that generates VAT and other tax – it also represents a depletion of the national savings pool, with long-term implications for individuals’ financial security.
He said the two-pot system was designed to balance short-term financial needs with safeguarding long-term savings. However, he expressed concern about individuals using their withdrawals for discretionary spending rather than essential needs.
On the topic of taxation, Kieswetter argued against a wealth tax as a means to boost state revenue. He pointed out that wealthy individuals have legal avenues to minimise their tax liabilities, whereas lower-income earners have fewer options. Instead, he advocated for strengthening SARS’s tax administration capabilities to enhance compliance and revenue collection without resorting to increased tax rates.
Although the tax revenue from two-pot withdrawals has provided short-term relief, Kieswetter cautioned that it does not offset broader economic challenges. He reiterated the need for structural reforms to create sustainable growth and job opportunities in South Africa.
