- Conversations about taxing the wealthiest individual in South Africa have returned to the front burner of discussion
- Expert says implementation may shrine South Africa’s Revenue base.
Wealth Tax in South Africa has returned to the front burner of national discourse in the nation as members of the popular African National Congress (ANC) continue to push its merits for the South African administration.
The ANC at a recently concluded in-house conference explained that the wealth tax is a viable option for funding basic income grants in South Africa. This decision by the majority member of the party is hinged on the fact that the top 5% of earners in the country hold what they described as “a majority of wealth”.
Still buttressing the party’s argument, a study conducted by the University of Witwatersrand came in handy as another case study to drive home its point on the need for a wealth tax.
The study titled Coronavirus: why South Africa needs a wealth tax now posited that
“a wealth tax on the richest 354,000 individuals could raise at least R143 billion”.
Snippets of ANC’s official statement,
“The majority of the wealth of this country is in the hands of 5% of the population. That’s not right. We’ll have to have SARS look into (a wealth tax),”.
The ANC further proposed that with the wealth tax in place, more than half of its proposed basic income grant of R350 for unemployed adults is already taken care of.
Wealth Tax in South Africa: Warning Follows
Despite the outstanding benefits highlighted by the ANC, tax experts are beginning to express their reservations about the proposed tax. Many of them warned that this move is capable of pushing the wealthiest in South Africa to seek somewhere else to invest their wealth.
In specifics, experts from platforms like Tax Consulting South Africa warned of the possibility of these individuals going offshore. Tax Consulting also warned of a possible capital flight through emigration.
On the flip side, implementing a wealth tax may see an already small tax base in South Africa shrink further, with wealthy individuals opting to emigrate to lower tax jurisdictions. This postulation is recently by the Bureau of Economic Research (BER).
See the argument of BER against the move,
“The BER goes further, as supported by a number of independent economists and recent Intellidex reports, raising the concern that should a wealth tax be implemented, it would be done so at a high effective tax rate due to the pool of individuals who qualify, being so small,” Tax Consulting said.
“The idea of a wealth tax is the adjust the financial inequalities in South Africa. (But) it is human nature to do what is best for oneself. This includes protecting hard-earned money against a tax, which can be construed almost as punitive in nature, or at least more punitive than the current bracket system of taxation in South Africa,” the group said.
Wealth Tax in South Africa: Going Down Memory lane
The topic of wealth tax in South Africa received wide popularity upon the release of the wealth tax report by the Davis Tax Committee in March 2018. In recent history, the discussion made it to the front burner 2 years ago before this current clamour.
Follow us on Twitter for more update
DISCLAIMER
The information contained herein is general and is not intended, and should not be taken, as legal, accounting or tax advice provided by Taxmobile.Online Inc to the reader. This information remains strictly the opinion of Taxmobile.Online Inc.
The reader also is cautioned that this material may not apply to, or suitable for, the reader’s specific circumstances or needs, and may require consideration of other tax factors if any action is to be contemplated. The reader should contact his or her Tax Advisers before taking any action based on this information.
All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Taxmobile.Online Inc.