Finweek English Edition - - In Brief - Mariam Isa is a freelance jour­nal­ist who came to SA in 2000 as chief fi­nan­cial cor­re­spon­dent for Reuters news agency af­ter work­ing in the Mid­dle East, the UK and Swe­den, cov­er­ing top­ics rang­ing from war to oil, as well as pol­i­tics and eco­nom­ics. She joine

There are many ar­gu­ments against a wealth tax. First, its ad­min­is­tra­tion is com­plex and ex­pen­sive, and will un­doubt­edly spur cap­i­tal flight from the coun­try, weak­en­ing the rand and fan­ning in­fla­tion – which hits the poor the hard­est. There are only 7.4m tax­pay­ers, who have al­ready been squeezed so much that some an­a­lysts be­lieve lo­cal taxes are be­com­ing de­struc­tive to the coun­try’s tax base, which pays for so­cial grants sup­port­ing 17m South Africans. Even­tu­ally there could be a dis­in­cen­tive to be­come pros­per­ous through sav­ing and in­vest­ment, and many more wealthy tax­pay­ers who pro­vide the bulk of tax rev­enues will leave the coun­try.

Global ex­pe­ri­ence has shown that taxes on the value of prop­erty will hit pen­sion­ers and mid­dle-class house­holds hard­est as they may not have the in­come to meet those re­quire­ments, given that the value of their homes would have climbed sharply over the years. This could lead to wide­spread sales of prop­erty, desta­bil­is­ing the mar­ket, or more bor­row­ing, which would lead to higher lev­els of in­debt­ed­ness.

One in­ter­est­ing point to make is that ac­cord­ing to mar­ket re­search group New World Wealth, at the end of 2016, more than half of SA’s dol­lar mil­lion­aires were from pre­vi­ously dis­ad­van­taged back­grounds. Its fig­ures also show that be­tween 2007 and 2015 the num­ber of white mil­lion­aires plunged by 42% while the num­ber of pre­vi­ously dis­ad­van­taged mil­lion­aires soared by 179%. So the ar­gu­ment that most of the wealth­i­est peo­ple in SA ben­e­fit­ted from apartheid doesn’t re­ally hold wa­ter.

Ring-fenc­ing the pro­ceeds of a wealth tax are un­likely to con­vince ev­ery­one as so much of the gov­ern­ment’s money is wasted through cor­rup­tion and in­ef­fi­ciency – ac­cord­ing to the Au­di­tor Gen­eral, there was a 50% in­crease in “ir­reg­u­lar ex­pen­di­ture” in the fi­nan­cial year ended March 2016, mainly be­cause of weak sup­ply chain man­age­ment.

Lastly, a wealth tax will not ad­dress the real struc­tural prob­lems re­spon­si­ble for SA’s high rates of un­em­ploy­ment and poverty, and is likely to be seen as a pop­ulist ploy to help win votes for the gov­ern­ing ANC in the 2019 elec­tion. ■

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