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Cape Town – The Davis Tax Committee says poor and middle class South Africans should be protected from having to pay a wealth tax.
In its latest report released on Thursday, the committee – chaired by Judge Dennis Davis – released a report updating the public on the work it has been doing investigating the feasibility of various tax measures for the country.
The wealth tax is a levy imposed on the personal assets of wealthy individuals to generate additional tax revenue.
The committee said last year it took 132 submissions into consideration when it came to the wealth tax question. It came to the conclusion that more needs to be done to strengthen the estate duty system, so that the wealth tax is better placed to redistribute uneven wealth in the economy.
“It must be noted that it was never the intention of the committee for middle class and poorer citizens to pay a wealth tax. The committee is essentially targeting the minority of the population that owns the bulk of the wealth of South Africa,” the committee report said.
Wealth and inequality
The committee stressed that the discussions surrounding wealth and taxing the wealthy are awash with research on wealth and inequality in the South African economy.
It said policymakers need clear consensus on who falls into the narrow definition of wealth before effecting a tax.
“According to the Credit Suisse Global Wealth Report (2016), the richest 1% of South Africa’s population owns 40% of the wealth of the country. Africa Check published on its website…that 10% of the South African population owns 70% of the net financial assets of the country based on figures from Allianz. A clear definition of wealth is, therefore, necessary if a comprehensive wealth tax is to be introduced,” the report said.
The committee’s report concluded that in the absence of a comprehensive wealth tax, it also gave serious consideration to retaining the estate duty system, despite calls to the contrary.
“Whilst a possible wealth tax for South Africa is under consideration, it is the view of the Committee that the current estate duty system needs to be strengthened and be more targeted to achieve its objectives as a wealth tax,” the commission report said.
