‘Estate duty scheme won’t produce vast sums of money’

But will bring added legitimacy to the system – Judge Dennis Davis.

JOHANNESBURG – An amended estate duty scheme won’t add vast amounts of money to government coffers, but will bring added legitimacy to the system, the chair of the Davis Tax Committee has said.

Speaking at the 5th Annual Fiduciary Institute of Southern Africa (Fisa) Conference on Thursday, Judge Dennis Davis estimated that changes to estate duty regulations, which currently contributes about R1 billion per annum to total government revenue of roughly R1 trillion, won’t add much more than an additional R2 billion or R3 billion.

His comments follow the release of the Davis Tax Committee’s interim report on estate duty for public comment in July.

Davis said fundamentally fiscal policy has to achieve a very fine balance. It has to make adequate provision for the lowest deciles of the population by way of an effective tax and transfer system. Otherwise the level of social instability currently encountered will be child’s play compared to what it would be.

But on the other hand fiscal policy also has to create sufficient space for the highest decile to invest, to become more entrepreneurial, to have some certainty and to secure vested interests as far as possible.

“That’s not an easy balance to achieve,” Davis said.

He conceded that there are some areas in the first interim report on estate duty that would require rectification in its second report, but said the committee’s fundamental starting point is that somewhere along the line appreciation of capital has to attract some tax at some level.

What that level is remains debatable, he said.

“If you have got someone – take the simple proposition – who has an estate of R200 million it does seem to me that they can live with a [R]160 [million] and it’s that sort of paradigm that we’re trying to grapple with.”

Offshore trusts

Davis said there are also significant problems with offshore trusts.

The 2003 tax and exchange control amnesty brought about R68 billion of previously undisclosed assets into the tax net, but this was probably “scratching the surface”, Davis said.

International developments also have to be taken into account.

Davis said an HSBC whistleblower told the world earlier this year that $24 billion of assets were held by HSBC from offshore clients. Around $2 billion were connected to South Africa.

Davis said he has no idea if this was held offshore legally or not, but Sars has been investigating the issue.

But international regulatory developments suggest that it will become increasingly difficult for people to avoid paying their fair share of taxes.

Davis said by 2017/18 banks in many jurisdictions all over the world will be compelled to disclose information related to their clients to Revenue Authorities.

“In fact, from next year the Swiss banks are already having domestic legislation, which is going to allow Revenue Authorities to ask questions of a kind that were never asked before.”

“So you can say this, by 2018 revenue authorities around the world including the South African Revenue Service will have access to information about people holding money illegally offshore.”

Davis said the committee may have to rethink their recommendations about a voluntary disclosure program to try to get more people into the tax net.



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Everyone has probably heard it all before, but why not consider a transaction tax instead of the mass of tax legislation we have at present. In the US it has been calculated that a 0.35% tax on every transaction (which means on both parties who deposit or withdraw money from a bank or similar institution) would be sufficient to replace all other taxes. I’m not sure how this rate would need to be adjusted for SA conditions, but it brings great simplicity. No more income tax, no more VAT, no more estate duty, no more any other taxes (except import / export duties). Totally fair and simple to administer.

End of comments.




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