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Wealth tax for SA? Have your say now

Apr 25 2017 18:24

Cape Town – South Africans have until 31 May to submit written input on the desirability of introducing new forms of wealth tax, the Davis Tax Committee said in a statement issued on Tuesday. 

The Committee, established in 2013 by former finance minister Pravin Gordhan is looking into the feasibility of introducing additional wealth taxation, including a land tax, a national tax on the value of property – in addition to municipal rates – and an annual wealth tax. 

In the 2017 Budget Review, Gordhan announced a new top tax bracket for high income earners of 45% for taxable incomes above R1.5m. About 100 000 taxpayers will be affected by the new bracket.

READ: Taxpayers foot bill for largest revenue shortfall in 8 years 

In a statement issued on Wednesday, the Committee, chaired by Judge Dennis Davis, said the distribution of wealth in South Africa is highly unequal, with recent empirical evidence suggesting that the Gini coefficient for wealth is about 0.95 (in comparison with the Gini coefficient for income of 0.67).  

The Gini coefficient is the measure of income inequality, ranging from 0 to 1.0 is a perfectly equal society and a value of 1 represents a perfectly unequal society.

“It is well established that economic inequality inhibits economic growth and undermines social, economic and political stability,” the Committee said. 

READ: VAT could generate more revenue than wealth tax - expert 

Currently, South Africa has three forms of wealth taxation – estate duty, transfer duty and donations tax – which together bring in about 1% of tax revenue.  

“Capital gains tax is considered by some to be a form of wealth tax but the Davis Tax Committee has taken the view that it is a form of income tax.  The Committee has previously considered capital gains tax in its estate duty reports so it will not be considered further during this inquiry,” the statement read. 

READ: How SA can use wealth tax to cut poverty, unemployment 

The Committee published two estate duty reports on its website (www.taxcom.org.za) on 13 July 2015 and 24 August 2016 respectively. 

In addition to this, the former minister of finance asked the Committee to look into the feasibility of introducing additional forms of wealth tax, it said. 

In its statement the Committee points out that it follows a “participatory and consultative approach”. The written inputs received will be used in wider engagements with stakeholders and special dialogue sessions will be scheduled on an ongoing basis to take into account a diversity of interests and opinions. 

Submissions should be emailed to taxcom@sars.gov.za or sent by post to PO Box 2344, Brooklyn Square, Pretoria, 0075. Those who make submissions should also indicate if an oral submission will be necessary to support the written submission.

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