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. ■