A Tax Task Team appointed by the Federation of Unions of South Africa (FEDUSA) to make a submission to the Davies Tax Commission has rejected calls for a wealth tax in the current environment of a weak economy; high employment, corruption and a deep trust deficit between tax payers and the government.
The Team said estate duty tax at 20%, donations tax, an additional 4% tax that was levied on higher salary earners in March; e-tolls and capital gains tax were examples of wealth taxes that have already been imposed by the state.
“In the current environment of state capture, corruption and maladministration, the government cannot simply be trusted with yet another tax; in addition, the problem with the introduction of a wealth tax is that the government will be taxing people who are already overtaxed,” said FEDUSA General Secretary Dennis George.
“At any rate, is the government spending the billions of rands that it collects in tax revenue every year on responsible and ethical projects that will reduce the triple challenges of poverty, unemployment and social inequality in our country?
George said it was important to approach tax design from an efficiency perspective; focusing on how each tax type impacted on achieving higher inclusive economic growth and decent employment creation, while explicitly take into account the national goal of reducing social inequality.
Figures released by Statistics South Africa this week show that one in every two South Africans is poor, a number that translates to nearly 30 million people living below the poverty datum line
“The implementation of international tax rules and mechanisms that prevent base erosion, profit shifting and tax evasion remains critical; however some of FEDUSA’s members are already overburdened with all manner of taxes and the notion of introducing a wealth tax would represent an additional charge and burden on the middle class and professionals in the country.
He said international experimentation with wealth taxes has known that at most, they contribute not more than 2% to total tax revenue, translating to about R30 billion in South Africa’s case.
The effect of such taxes on individuals is significant but the contributions to the overall tax base is minimal, concluded George. Judge Davis has asked the FEDUSA Tax Task Team to prepare a further submission on the direct taxing of wealth.