Wealth tax’s other virtue

CHRISTO Wiese probably didn’t attend any of Thomas Piketty’s lectures while the French economist was in South Africa a few months ago. He probably hasn’t read Piketty’s 600page bestseller on inequality, and he might not even be bothered reading a synopsis.

But Wiese probably understands more about the challenges of taxing the rich than anybody in South Africa. One of the biggest is simply trying to find out how much wealth there is, and who has it.

Piketty’s suggestion that a wealth tax be introduced in South Africa was greeted with loud indignation by the wealthy. He reckoned the tax would not generate much income for SARS but would have a much more useful function. It would give the authorities some idea of what wealth there was and who owned it — the very reason the wealthy balked at the suggestion.

A few years ago Wiese handed R2billion over to SARS after a protracted dispute apparently about an amount less than R1-billion. He described the dispute as part of the “healthy tension” between wealthy business people and tax collectors.

In an interview with the Sunday Times two years ago, Wiese spoke about the seven or eight accounts in overseas tax havens that he uses, with the knowledge of SARS, to minimise his tax bill.

By all accounts it is a common practice of the megarich who have a great incentive to aggressively manage their tax — and the money to pay for the expertise. Aggressive tax management means that many of the enormously wealthy individuals behind the multimillion-rand remuneration packages and the multibillion-rand shareholdings on the Rich List may even be able to legally sidestep their full tax liability.

There is much talk of global authorities clamping down on the many legitimate ways to do this sidestepping, but so far there have been limited signs of progress.

The investigation into 2 200 HSBC accounts with possible South African links, which made headlines earlier this year, was the result of an employee who went rogue, not investigations by the authorities.

In The Hidden Wealth of Nations, Gabriel Zucman reckons about $7.6trillion of global household financial wealth is held in tax havens. He agrees with Piketty’s suggestion for a global financial register, automatic exchange of information and new ways of taxing multinationals.