Wealth tax not the real solution

A WEALTH tax may help to tackle inequality but would not yield much revenue, according to Judge Dennis Davis.

Davis said at the Wits Business School on Monday night that the Davis Tax Committee had received more than 300 submissions about the proposed wealth tax.

“International evidence suggests that if you get 1% or 2% of your tax take as a wealth tax, that’s not going to solve the problem. That might help with the deficit but not more than that,” said Davis.

The committee was set to meet EFF and trade union representatives yesterday.

Davis said wealth tax revenue would not come close to corporate or value-added taxes, but would address issues of inequality.

His comments follow reports suggesting the South African Revenue Service (SARS) faces a revenue shortfall of as much as R50-billion.

Something had to be done to address inequality in SA, said dean of the faculty of commerce law and management Imraan Valodia.

“A tax system should be one of the avenues we use to tackle that problem.”

The level of inequality was rooted in the history of dispossession of people’s assets, he said. The politics of why SA should have a wealth tax was “abundantly clear”. Despite this, Valodia said that it would not help to collect large amounts of money.

“You’re not going to earn a large amount of revenue from this as we have a relatively small number of really wealthy individuals. Unless you’re going to tax them at massive levels, which I don’t think you can do, there’s not enough wealth in SA.”

He also said there were concerns SARS may not be able to implement a wealth tax.

Professor of economics and public finance Pundy Pillay argued it was purely a political ploy that governments would introduce a wealth tax but do nothing about correcting the socioeconomic issues.

“When you dabble with things like the wealth tax, it can divert you from things that should be the focus of the government,” said Pundy, citing the inability of the government to address the issues of poverty, unemployment and inequality. — BDLive