In favour

Finweek English Edition - - In Brief -

The main ar­gu­ment in favour of a wealth tax – which is a tax on ben­e­fits de­rived solely from as­set own­er­ship – is that it is the “right thing to do” as SA is one of the most unequal coun­tries in the world, due to the legacy of apartheid. Ac­cord­ing to this year’s in­equal­ity re­port from global char­ity Ox­fam, the to­tal net wealth of three bil­lion­aires in the coun­try is equiv­a­lent to that held by the bot­tom 50% of the pop­u­la­tion, while the rich­est 1% holds 42% of the wealth.

This is sober­ing as fig­ures from Statis­tics SA re­leased in Au­gust showed that one in ev­ery two South Africans live in poverty, de­fined as earn­ing less than R1 000 a month. This works out to 30.4m peo­ple in 2015, up from 27.3m in 2011. Yet the value of the coun­try’s house­hold net worth – af­ter debt – amounted to R9.8tr at the end of last year, which is more than twice as much as GDP and well above the R6.01tr held in 2010, ac­cord­ing to fig­ures from the Re­serve Bank.

There is grow­ing ev­i­dence of a neg­a­tive link be­tween in­equal­ity and eco­nomic growth, although it is not clear that the one ac­tu­ally causes the other. Greater in­equal­ity sti­fles spend­ing by lower-in­come groups, ham­pers some forms of in­vest­ment, and fans so­cial in­sta­bil­ity. Sup­port­ers of a wealth tax ar­gue that if the pro­ceeds were ring-fenced for a par­tic­u­lar pur­pose, it would be more palat­able to peo­ple who would have to pay it. ■

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