Proposal for solidarity tax on personal incomes, turnovers
THE GOVERNMENT should consider a “solidarity tax” to be funded by a onceoff tax on company turnovers and on personal incomes to reignite the economy after the Covid-19 pandemic, said the Inclusive Society Institute’s chief executive, Daryl Swanepoel.
Earlier in the year, the institute conducted a number of surveys related to the impact of Covid-19 on the small, medium and micro enterprises (SMME) sector.
As part of a survey of 1 084 SMMEs, the notion of a solidarity tax on corporate turnover and personal incomes in excess of R240 000 was tested among SMME owners, as a suggestion to reignite the economy after Covid-19.
However, said Swanepoel in an interview with Business Report, the notion of a solidarity tax was also now being raised in the public discourse.
President Cyril Ramaposa’s economic advisers had recommended a wealth tax, and so the society had written to Finance Minister Tito Mboweni about the findings of the survey.
In the survey, the proposal for a 0.25 percent turnover levy, which could potentially yield the government R25 billion, received support from more than a third of the SMME respondents, before the full economic impact of the pandemic was realised.
“The institute believes that given the realisation of where the economy now stands, the level of support would even be higher,” said Swanepoel.
Also tested in the survey was the acceptance among SMMEs of a onceoff tax of 1 to 2 percent on personal incomes above R240 000 a year, which was estimated would yield the government between R3bn and R6bn. Swanepoel said some 44 percent of the respondents supported the idea of this tax.
“Nobody volunteers for higher taxes, but it is in the interests of the ‘haves’ to ensure the country’s ability to maintain economic and social sustainability,” he said.
Other findings of the survey were that more than 60 percent of the respondents supported the closing of loss-making state enterprises as the preferred means to raise cash to kickstart the economy, he said.
He said the institute’s proposals were not without precedent, as there had been similar tax, the so-called Transitional Levy, implemented in South Africa in 1995 and 1996, which involved a 5 percent levy on incomes above R50 000.
He said a broader-based tax increase was not really feasible given the weak state of the economy.
The National Treasury said in Parliament last month it was planning to increase taxes next year, and it would consider proposals from outside organisations on how it could raise further income from additional taxes to fund shortfalls of revenue projected for the next four years.