Coronavirus: Why South Africa needs a wealth tax now

This would allocate the fiscal burden of current interventions on those most capable of paying.
A woman carries a bucket of fresh water to an informal settlement in Khayelitsha, near Cape Town. South Africa has the widest wealth gap in the world. Image: Getty Images

The consequences of the Covid-19 lockdown are yet to be fully determined and understood. But one thing we can be fairly certain of – in South Africa its impact will be shaped by the country’s inequalities.

Our study reveals that half of the adult population survives with near-zero savings, while 3 500 individuals own 15% of the country’s wealth. The response to the crisis must take this into account to help the most vulnerable while still safeguarding fiscal sustainability.

Based on our new study on wealth inequality in South Africa, we propose a progressive solidarity wealth tax. This would allocate the fiscal burden of current interventions on those most capable of paying. It is in line with the recommendations recently made by the International Monetary Fund to equitably attain fiscal sustainability and better position the economy for post-Covid recovery.

We show that a wealth tax on the richest 354 000 individuals could raise at least R143 billion. That equates to 29% of the announced R500bn fiscal cost of the relief package.

Read: Raising revenue through a wealth tax is clutching at straws

Unequal distribution

A lot of studies show how extreme income inequality is in South Africa, but little has been documented about wealth. Net wealth is the sum of all assets less any debts. Assets include cash, bank deposits, pensions, life insurance, property, bonds and stocks. Debt includes mortgages and other loans such as retail store credit accounts or loans from friends, family and money lenders.

In our new paper, we combine national accounts statistics, household surveys and exhaustive tax microdata to assess the reliability of available data sources. We also provide the most comprehensive possible picture of the distribution of wealth. This is the first time this has been done in South Africa.

Better data is needed – about direct ownership, capital income and assets held through trusts. Nevertheless, our results give a good sense of the magnitude of the disparities. Three key results are worth mentioning.

Firstly, in 2017, the 10% richest South Africans (all adults with a net worth over R496 000) owned 86% of wealth, with an average of R2.8 million per adult. In contrast, about 18 million (the poorest 50%) were either in debt or had near-zero savings. With an average net worth of R486 million, the richest 3 500 owned 15% of wealth. This was more than the 32 million poorest altogether.

Secondly, these extreme inequalities extended to all forms of assets. The richest 10% owned 99.8% of bonds and stock – which accounted for 35% of wealth. The top decile also owned 60% of housing wealth and 64% of pension assets. Housing wealth amounted to 29% of wealth and pension assets to 33%.

Thirdly, we show that wealth concentration has remained broadly stable since 1993, and may even have increased within top wealth groups. Wealth inequality remains significantly higher than what could be estimated in Russia, China, India, the US or France.

Why wealth inequality matters now more than ever

Our findings are particularly relevant to the current crisis. South Africans are unequally armed to survive the contraction of the economy produced by the lockdown. Our paper helps get a sense of the size of the population likely to be under intense stress in the very short term.

Before the lockdown, about half of the population was already in debt, or had near-zero net wealth. Therefore, this crisis will at best sink millions of people further into indebtedness or force them to beg, loot or starve. Conversely, our paper shows that a minority of individuals are in a much less vulnerable situation.

The policy solutions needed to absorb the shock and recover fast must be carefully designed to take these factors into account. Principally, they need to reallocate resources to give everybody equal chances to survive the shock.

In this unprecedented crisis, the government announced a relief package with a R500 billion fiscal cost. One key remaining question is how such a plan will be funded.

The possibility of collecting additional tax revenue from those most able to contribute has not yet been brought to the table. We believe it should be considered. Our estimation suggests it would raise significant revenues. And it would allow the country to allocate the cost of the national response on the least vulnerable.

In the spirit of solidarity, a wealth tax could be part of the solution to safeguard long-run fiscal sustainability and inclusive growth.

How much could a wealth tax raise?

We propose a progressive wealth tax, which would apply only to South Africans with a net wealth currently superior to R3.6 million, that is the richest 354,000 (1% of the adult population).

The first bracket – all wealth between R3.6 million and R27 million – would be taxed at a 3% rate, the second bracket (R27 million to R119 million) at 5%, and all wealth above R119 million at 7%. Individuals with less than R3.6 million would be exempt. A billionaire would face a 6.7% tax rate: she would pay 3% on the fraction of her wealth higher than R3.6 million but lower than R27 million; 5% on wealth higher than R27 million but lower than R119 million; and 7% of the R821 million she owns above R119 million. This would leave her with post-tax wealth of R933 million.

Other tax schedules could of course be designed. The objective here is to give an order of magnitude of the expected revenues.

Taking into account the recent Johannesburg Stock Exchange All Share Index drop in value and assuming a 30% evasion rate (as available evidence suggests), we simulate that such tax would raise R143 billion.

It would still leave rich individuals with very high levels of wealth: for each of the brackets, post-tax wealth would on average be R9.3 million, R50 million and R376 million respectively.

A realistic policy

Critics of a wealth tax argue that it would be too costly and complex to implement. But South Africa is well positioned to administer this tax cost-effectively.

Firstly, the tax base we consider covers very few individuals, reducing the administration required.

Secondly, South Africa already has in place third-party reporting by financial intermediaries straight into the South African Revenue Service, providing information on capital income and ownership. Existing municipal valuations could be used to value property assets. This would cover the major components of asset holdings, especially stocks and bonds.

Capital flight, through offshoring or migration, is a potential risk. We account for this by making conservative assumptions about avoidance and evasion, and still project sizeable revenues. There is also markedly more cooperation between tax authorities to clamp down on undeclared incomes and assets in foreign jurisdictions, including tax havens. The premise is not a given. Capital flight implies forfeiting opportunities that considerably enriched them for the sake of avoiding a tax that barely makes an impact on their total wealth. Importantly, the wealthy themselves have said now is the time for solidarity.

A wealth tax, contrary to popular opinion, would not necessarily discourage job-creating investments. Maintaining fiscal sustainability while sparing the most vulnerable is more important to ensure a quick recovery and attract investments. Moreover, inherited wealth has a significant role in South Africa: we find high levels of wealth concentration even among 20-year-olds. Diminishing the importance of inherited capital with a wealth tax may actually be a better collective strategy to improve social welfare, including growth.

In light of the lessons learned from the Zondo commission of inquiry into corruption, taxpayers would need guarantees that this special tax will be properly collected and spent. The national treasury already uses ringfencing mechanisms to make revenue and spending for specific projects accountable. To answer potential criticism, the government could build on such rules to generalise more transparent practices.

There may be theoretical implementation challenges of such a wealth tax. But we would argue that South Africa is well placed to overcome these.

When designing the radar for Britain during World War II, Robert Watson-Watt justified his choice of a nonoptimal frequency as follows:

Give them the third best to go on with; the second best comes too late, the best never comes.

This radar was pivotal in allowing Britain to overcome a larger, more sophisticated German air force.

In our situation, we cannot let perfection be the enemy of progress, or in this case, survival.The Conversation

Aroop Chatterjee is research manager: Wealth Inequality, Southern Centre for Inequality Studies, University of the Witwatersrand, Amory Gethin is research fellow – World Inequality Lab – Paris School of Economics and Léo Czajka is research fellow – World Inequality Lab – UCLouvain.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Do you people get paid to write such garbage. Here I am doing social distancing to avoid the coronavirus but reading your article just gave me cancer. I have no idea what communist/socialist ideologies you want to implement in South Africa but I think you should go back to whichever country you came from. Our problem has never been the lack of money , it’s been the mismanagement and theft of money. So now you suggest we burden the tax payers with even taxes. This is typical a lazy mans excuse. Instead of finding new and innovative ways to increase the countries finance you look at a wealth tax , instead of talking about managing the countries finances and stop corruption you look at wealth taxes. Wealth taxes are a way of taking even more with doing the least amount possible. How about you donate some of your wealth to the poor before you offer your opinion to us. It shows nowadays that having a degree counts for nothing. To moneyweb please stop posing for the lack of a better term KAK

My bit. Tax me more.. Goodbye all my labour.. No domestic with 3 kids..no garden gent.. Plus the extras they get eg food, transport and school help etc et . Any I save on uif.. They are emoyed cause of my kindness.. Easy for me to do all the work they do, on a weekend. And yes, I still pay my taxes.

In addition ALL donation to any section 18a company and or organization helping the poor will IMMEDIATELY STOP. No more mahala!!!!!!

The painful reality is that the government and probably 80% of the population would agree with the author’s sentiment.

Since that’s the case, we have to keep our assets as far out of their reach as possible.

3500 people work harder than 55 million

THATS WHY WE HAVE INEQUALITY IN THIS COUNTRY

I’s the difference between the have’s and the have nots where the have nots receive social grants and the haves subsidize them
and the Government steals the rest

The author of the article is clearly not one of the 3500 hard working South Africans, that’s quite obvious

Yeah. Cheers moneyweb. Won’t be on here again.

Opinion-based articles are cool. But this is tired and so moronic.

Hi triplevere

We’re sorry to hear that. You might want to read Barbara Curson’s article tomorrow though, titled ‘Raising revenue through a wealth tax is clutching at straws’. It offers a different take. Best regards

Lets not forget the blood sucking filth that are the UNIONS. Absolute scum.

The article needs to be balanced.
Why does the non-wealthy not contribute more? And what can be done to activate their contribution.

The conclusion seems to be an easy way out.

Please follow up with authors about what will be done to increase tax contribution from less “wealthy” South Africans.

I think this is the core issue.

Jumping to a wealth tax is easy – lets kill the golden goose.

Amazing how socialist enjoy the benefits of capitalism. Stop the funding and let them find out what real work is.
After 5 weeks of lockdown we have grown use to doing small garden, ironing and cleaning on our own. Tax me more and the once a week gardener and twice a week char can ask the socialist for more. I earned zero but paid them . Party over

What do you expect? Academia is based on socialism and naturalism. How much value do they actually add with their self-biased opinions? The late Malcolm Muggeridge rightly opined that we have educated ourselves into imbecility. Just because a man has a degree doesn’t necessarily make him wise.
And what is meant by the claim that all this and Covid-19 is based on scientific and empirical evidence? Empirical means much more than someone making a statement that statistical models prove their point of view. We know that there are statistics, damned statistics and lies.
Of course something must be done for the poor and disadvantaged. cyril has a two-fold problem How to govern the virus challenge, but most importantly how to manage the ANC culture of cover up. They do not acknowledge their sins and never take accountability for their actions.
a well-written article.

Reading this article gave me Cancer

How would this tax be distributed? Would it be race based?

Of course it will be “race” based:

First in line:

Car no 1: Cadres
Car no 2: Ministers
Car no 3: BEE candidates
Car No 4: State Capturers

And the winner of the “race is

ANC

Second by a loooong way are the people:

starving, jobless, let down and disappointed
limping in with their second hand jalopies, taunted, disgruntled and robbed of their liberty and freedom in the race by liars,cheats and thieves

Start off by wealth-taxing the fat cats of the ANC while recouping our stolen taxpayers’ money from Dubai and elsewhere.

Why don’t we shut down the Southern Centre for Inequality Studies, University of the Witwatersrand; the World Inequality Lab – Paris School of Economics; and the World Inequality Lab – UCLouvain, so that taxpayers are relieved of the burden of pouring their hard-earned tax money into bottomless holes spewing nonsensical drivel. This money could then be redistributed to the poor, and all ivory-tower academics leeching off honest citizens can go look for real jobs and actually contribute to society.

I did enjoy that comment 🙂

Before we implement this wealth tax, let’s do a small experiment in that regard. Let’s go to some golf clubs and ask them to force their professional players to subsidise the handicapped players. Let us for a moment forget why some golfers are professionals, that they have natural talent, that they practice day in and day out, and that they have skills.

Now, what will automatically happen if we implement such a system? Well, the best players will migrate to those clubs where they don’t have to share their winnings with the amateurs. So, the clubs that allow the good players to keep their winnings will attract more good players, generate increased competition, get more members, find more sponsors, have better facilities, and will be able to collect more membership fees.

On the other hand, those clubs that participated in our experiment will see a continual decline in their membership of professional players and an increase in the number of bad players who cannot afford membership fees. It won’t be long before there are no good players left at this club. The unskilled players, the majority now, who never practice their game, elect that person as captain of the club, who promises to redistribute the winnings of the best players among the bad players. The greens will deteriorate, the bathrooms will fall apart, the vagrants will inhabit the clubhouse, and other clubs won’t want to associate with this bankrupt experimental club that has run out of sponsors and honourable members. Our experiment is a failure.

This economic experiment has been running for 25 years in South Africa, and the results are the same. To correct the situation we first have to evict the vagrants from the clubhouse.

Sickening article. They can tax the wealthy all they want, it will not make ANY difference to the livelihoods of the poor. Afraid to say, our beloved SA is beyond repair.

Buis:

Let’s say the two Ruperts and the however many Oppenheimers and the other top 10 gave away ALL their wealth. Call it R750 billion

We have 55 million people so each get say R13k. Lekker – moerse party!

Now what? That is four months of minimum wage. Now we redistribute the 750 billion of the next 50 on the list. Nog ‘n party, nog vier maande. Now we redistribute the wealth of the next 250. Another few months.

It is very easy to take pot shots at the wealth of a few when you don’t understand the math of populations or the multiplier effect of the few that employ the many

One can also argue with the narrow tax base in South Africa… that a wealth tax is already in effect. (Added to you actually do not get *anything* back for your taxes… which makes it one of the most expensive places in the world)

Well done – penalise people for saving and living within their means.

I already give against my will (taxes) and freely (charities of my choice).

Utter garbage and socialist drivel – EWC rubbish

Lets try to understand this : My house which Ive owned for 35 yrs and paid R70K for has grown n value & because of my improvements to say R5M.
So now as an old Pensioner having diligently pd off my bond over 30 yrs , I,m expected to pay a wealth tax in addittion to Capital gains if I sell , and bearing in mind that the Govt have already said their policy is to take land without compensation !!!
Please Moneyweb dont publish this Communist Rubbish !

This article was perfect for 1 May. Not for any other day of the year.

Brilliant chirp!!

1st May is exactly one month too late…

More like April 1st.

I don’t have a problem with taxing the rich more for the betterment of the country. Wealth tax has been a discussion on the lips of many people around the world for quite some time now including the very wealthy. Billionaires around the world have shown support for paying more tax as it will help better mankind in the long run BUT…

If you intend on implementing a wealth tax here in SA then you need to scrap BBBEE! You cannot have your cake and eat it! Yes we all know this article is pointing a big fat finger at white people but you can’t expect them to now be paying more taxes as well as excluded them from participating in the economy due to BEE policies. Sure, tax the rich more but make it an even playing field for goodness sake, where all participants of this country’s economy have equal opportunities and are not restricted by unfair policies. It must be fair trade for all regardless of skin colour!

If you lift these unfair policies where all participants can trade equally you will create a situation where “rich” people will become more rich and in turn the government can then collect more wealth tax. If you do not, you will see a massive increase in wealthy people leaving this country, more so than ever before!

Problem is the crooks will levy a wealth tax on everyone that has accumulated more than R500k while they happily watch their dollar accounts grow in Dubai.

In essence, a wealth tax is nothing but a penalty for creating jobs. The free-market capitalist system is the only system known to man that can raise the relative wealth of everybody in society. The mechanism by which the market empowers, enables, rewards and remunerates people for their efforts, is by means of employment.

Therefore, it is clear that a wealth tax will condemn people to a life of poverty, famine and desolation. The law of unintended consequences accompanies the ignorant.

A wealth tax is the last thing SA needs, if you want to lift the poor out of poverty then embrace free market capitalism. The priority should be to remove the ANC so production can begin not redistribution. The Author has shown what happens if one attends this education system.. unreal.

What absolute rubbish, and here we have Moneyweb giving publicity to communist trash without a balanced response.
It has become very apparent in this time of the virus pandemic and financial turmoil, that the South African media’s (and journalists) subservient relationship with the ANC government is almost total, with one or two notable exceptions – (Max du Preez among them).
Compared to the British and American media’s interrogation of their respective governments policy and decisions – our SA media should hang their puppy-dog heads in shame.

I totally agree that the ANC cannot continue to take from some to give to their lazy voters who in my opinion sit at home all day and demand everything for free while increasing the population.

As the saying does
Give a man a fish and you feed him for one day; teach him to fish and you feed him for a lifetime.

So I believe that instead of handing out free stuff to hide their failure the ANC government should teach these lazy, blood suckers to take care of themselves instead of relying on other people’s hard earned money to house, feed, clothe, educate and take care of their medical care.

If they go ahead with the proposal of taxing wealth (value of your house, car, pension, savings, investments) over 3,6 million at 3% (lowest wealth tax bracket) then I would rather live lavishly than save just to have some thief take my hard earned savings cos over years I am going to lose my savings anyway.

What? You are kidding right? South Africa’s few wealthy is already leaving these haunted shores, no reason for them left here.
A government which interprets the Constitution as it sees fit and steps on the individual’s rights, now wants to increases the tax burden on the already few wealth left. They will not stand for this. They have the means to GTFO.

It looks like the Communist Trendy Lefties is writing just what the governments want to implement the last phase of the NDR (National Democratic Revolution)

Instead of of growing the pie, you want to redistribute it. Afterall, it is not about absolute wealth for you people, but relative wealth. As long as we are all equally poor, am I right? Then we have perfect equality. Equally miserable.

No. Look to the Romans for objective guidance. When the People of Rome demanded “Bread and Games”, the final phase of the downfall of the once glorious Rome began.

Rather, try to enrich everyone, raising living standards by growing the economy, not by improving some arbitrary measure such as the damned Gini Index.

Yep, instead of creating an environment where everyone can enrich themselves through working the corrupt, thriftiness, socialist ANC governments wants to make everyone poor so that we r all equal except them who will still be filthy rich from all the money they stole.

Just look at Zimbabwe

It won’t raise R143 billion, it’s actually only R129 billion. You forgot about the 10% that goes to Ace.

The quality of this research and article is pathetic to say the least.The fact that moneyweb entertain this rubbish and concluding deductions and interpretation is even more disturbing.

There is a reason academics in university earn a salary and don’t create jobs and business empires its because they are incapable period.

The void between financial IQ and theory is a vast void!

As a country we have just lost 4000 high net worth individuals, entrepreneurs and job creators now you want to chase away the last dregs of good folk that have stuck it out and tried to help fix SA.

If you have never run a business successfully for 10 years or more. If you have never created jobs in a sustainable manner for others for 3 years or more you have no business broadcasting such drivel on a plateform like this.

I take a dim view of moneyweb management for not being more discerning in the quality of their articles published!!!

I disagree as this type of article tells us what others are thinking and want put into action. The ANC are likely to lap this up with “Judge” Denis Davis et al to the fore. So it serves as a timeous warning to get your money out, then yourself and your family, if at all possible. It is Zim or Venezuela here we come.

When the revolution comes, you best believe I’m paying a visit to the Southern Centre for Inequality Studies, University of the Witwatersrand.

You can tax wealthy South Africans 90% the problem is the money never reaches the poor its is stolen.
It’s sad to see Moneyweb allowing such drivel on its site.Readers these are the liberal left wing socialists professing to your kids at universities.The same is happening in the USA where leftist has infiltrated and taken over institutions such as Harvard and Princeton and the news media(CNN, MSNBC, PBS, ABC, NBC, New York Times, Washington Post etc) and sensering conservative voices.

Maybe it is time for the final 10% to leave as well.Remember you cannot multiply wealth by dividing it.

Dear AROOP, AMORY and LEO. You are living proof of the dumbing down of the tertiary education systems globally.

Your ‘research’ as you refer to it, is actually just projected French utopian socialist theory (one of the main building blocks of communism), applied to RSA numbers. Your brain washed ‘thinking’ and idealistic theories, are what resulted in the Berlin wall being built in the first place and the total failure of this theory and policies (like the ones you suggest now) are what caused the same wall to come CRASHING down in 1989.

Please go and peddle your worthless academic drivel elsewhere. Dankie.

“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it”- Frèdèric Bastiat.

What blows my mind reading such stupid articles is tat its always a gimme mentality at play. This country has experienced a population explosion whereby kids are being born and there is no future for them as there are just no job opportunities, the government has killed off any entrepreneurial spirit with their draconian laws. The real kicker for me is that we have +/- 45% of the population unemployed poorly educated and yet practice no family planning, and no robbing of the “rich” is going to improve the situation in this country – because before it gets to the intended party it will by and large have been stolen by government officials

Of course reproduction will continue when such behaviour is rewarded with a child support grant.

Prior to a wealth tax is the need to arrest corruption and corruptor in South Africa, especially at this time of Covid-19.

Ha ha ha, sorry, but this was really funny !!! Let’s tax ourselves wealthy !!! This is the type of article that should be published on April the 1st, you’ll win the April fool’s prize GUARANTEED ! But thanks for making my day, I needed this laugh with all the virus doom and gloom going around.

In the words of the Chinese philosopher Lao Tzu, “feed a man a fish and he’ll eat for a day, teach him how to fish and you feed him for a lifetime”. Apply this proverb to the “redistributed wealth” that is proposed above and the recipients will only eat for a day. The redistributed wealth will meet the same fate as an ocean raped of its fish to the point of extinction.

How much tax did ‘they’ lose via cigarette and alcohol sales?

yes but the zumas are makin it big

I am not going to pay for Zuma corruption, anc corruption, cadre deployment, incompetence and downright thievery. Greate a normal economy, get rid of the unions, get everybody to work, then broaden your tax base, lower vat, lower the fuel levy, halve politicians pay, halve income tax. Then you’ll have enough tax income to truly help the poor and needy. N.S. swak artikel moneyweb. Swakste by verre

A socialist walks into a bar and yells “Drinks are on me who’s paying”.

There is only one thing worse than being abused by a capitalist pig – not being abused by a capitalist pig

On “life insurance”? Don’t you have to dead first to get the “wealth”… Oh, but then it pays out to somebody else…. because you are dead…???

“The trouble with socialism is that eventually you run out of other peoples money” Margeret Thatcher.

I must have missed the academic paper titled ‘We need good, clean, efficient Government NOW’. Maybe that paper is jettisoned because everyone knows it way beyond our current ruling party.

SA will never move forward, will never prosper because we are stuck in victim mode promotion! Why are people not taught to also take responsibility of their own lives? People need to work hand in hand with government. They should learn to prevent( not having kids when they are not ready or more than they can afford). I take note of those people who are abused. People need to learn to understand budget, savings and investments.
People need to be told the truth that they can’t outsource responsibility and only adopt democracy!
People work hard and sacrifice for their investments. SA is already over taxed. Government needs to be truthful also. The majority of what the Gov is already doing free of charge from the masses is because of tax of the few South Africans!

BOET.

Inequality comes from having too many children and a low IQ.

Throwing money at the problem wont resolve it. As a “Research Manager” have you considered it? Why not mention the actual problem?

SA you copy from Chinese, Cubans and others but you pick and choose what you want to publicize and communicate to your own people. Please show the true true China( all of China), Cuba( all of it). Be transparent with the governments of these countries and their rules and processes to prosperity! SA is over selling and selling a lie that why SA people are than stuck on demanding mode and also burning and destroying mode!
Did China get to where they are today by equal pay, NHI? I am not promoting oppression of people but even in the bible there were poor people, rich people. What was being promoted is hard work, empathy and love by Christian faith .
Let stop preaching this bile please!

How about a headline: “South Africa needs to recover zuma era corruption money urgently”? Wouldn’t that be much more appropriate?

I worked for 50 years and every cent I have is from taxed money and now you want to tax me again. I have struggled, have lived on pap and spinach, was not able to send my children to university and have never received anything from this government. Why dont you rather recover the money from the ANC thieves, why do you see pensioners like me as easy targets? Do me a favour get lost.

Why should those people who plan their lives and families pay taxes for those who don’t?

Three million people produces nearly all the taxes – 54 million people produces babies – where do you think the poverty comes from.

How can you talk about inequality without mentioning the inequality in mindset between rich (middle class) and poor?

The rich vote for good government, the poor vote for major corruption and mismanagement.

The rich do not have more children than they can afford, millions of the poor have children that they cannot afford.

Let’s play open cards here. The only reason(s)ridiculous arguments and promises such as imposing a wealth tax, Covid relief in the tourism sector to BEE companies only, EWC, etc. are made is to ensure the cANCer government retains their votes and position of power.
In fact I firmly believe the only reason we’ve had these draconian laws put into place for Covid-19 is so that the ANC can protect their voter base from disappearing.
This really is a ‘Godforsaken’ country.
Adjective ‘Godforsaken’ meaning: ‘lacking any merit or attraction’

First you destroy my business, then you ask me to pay for the privilege. I don’t think so Tim.

A lot of squealing in these comments, but no rationals riposte.

1. Who says ‘wealth’ starts at R3.6m? That seems arbitrary.
2. You need to consider liabilities: against every pension, there is a liability, namely living costs in retirement. Most people cannot afford to maintain there standard of living in retirement, which means there is little wealth in pension funds (even if the fund is worth R10m – that translates into a sustainable post-tax income of perhaps R32k per month on a prudent 5% draw-down, and medical aid will eat a big chunk of that, even before you start living).
3. The same might apply to a retired person living off their savings. You have to subtract their future living costs to get to real wealth.
4. Pension funds assets are subject to tax (as high as 36% if you take the cash) – has this been considered/deducted?
5. There is probably a CGT component in most other assets that needs to be deducted.
6. How do you purport to collect the tax if wealth is locked up in property and pension funds and the owner has no cash resources?
7. If a pension is converted into an annuity, the holder’s balance sheet won’t show an asset anymore. Is that person now no longer wealthy? That seems like an easy way to avoid this tax.

This paper gets a D-. Full of ‘research’ but little evidence of common sense, or understanding of what wealth actually is.

SA government workers are overpaid by a third, by world standards, according to the economist Mike Schussler.

Pay them one third less and it frees up R150 bn from the R500 bn government wage bill.

The money wasted in Eskom alone is enough to provide a house for everyone.

The three authors should grow a backbone and put the blame where it is due – the ANC government and it’s 25 years of mismanagement.

A wealth tax will never work as a tax on net assets. May as well just nationalize and become Venezuela 2.0 We could however take a leaf out of the Alternative Minimum Tax in the US.

Our issue is IMHO that we have a skew issue in regards the scope of asset-rich-income-poor. There are tens of thousands of people with $1m plus of investable assets but R250k in taxable income. It is hard to imagine how some people live the lives they do with the income they pay tax on.

We have very clever tax lawyers

This is ridiculous. R3.6m is just $189 000. I don’t think anyone would say that this amount necessarily makes you wealthy by any stretch of the imagination. The maximum tax bracket is already 45% and now you want to propose an additional tax on the wealthy. Currently we get sweet bugger all for the taxes we currently pay – we still have to pay for education, medical healthcare, security, back-up electricity generation, etc etc… This is a joke!!!! You will only land up forcing the remaining so called “wealthy” people to look for greener pastures overseas.

I hear Mbalula is proposing a bail-out for the taxi industry. So a lawless industry that has never made any serious effort to contribute taxes gets a bail-out yet here we are talking about a wealth tax. I bet some people are getting mad as hell when a thug-like killing-machine taxi industry is placed above law abiding tax-payers. When will the madness end?

Haha. Is this joke? I am certain a 12 year old will apply more common sense. 7% tax above R119 million. Say return on capital is 10% pa. your capital will grow by 3% before inflation. Say inflation is 5%. You may watch your wealth disappear, channeled to incompetence and corruption. Its just obvious capital will vanish. No incentive to accumulate capital, means no capital.

Obviously written by academics.
Unworkable socialist tripe.

What absolute garbage!
Basic economics show you that to eradicate poverty you can’t destroy wealth.
If you need proof that this vile nonsense you are regurgitating don’t work, just do some homework. Take your hear out of the sand and look around the world.
SA’s problem isn’t unbalanced wealth distribution, its uneducated people making economic decisions who then don’t understand that it doesn’t work.
Want to really solve our wealth distribution problem? Then focus on wealth creativity.
A billionaire needs other rich people around them.
A billionaire will leave with all their wealth if it makes financial sense to do so.

It’s hilarious that these people are passing off like this is some well researched academic article, when they clearly have never heard of the LAFFER CURVE. Instead of just writing an article based off your own uninformed opinions maybe use this special thing called google and educate yourselves.

Politicians won’t vote a tax on themselves. They are the most wealthy after all.

Unbelievable! Only academics who have never started and run a business, employed people or put themselves at risk in any way – earning a salary paid for by tax payers could think that Wealth Tax was a good idea!

End of comments.

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