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A “wealth tax” for South Africa?

17 May 2017   (0 Comments)
Posted by: Author: Carmen Gers
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Author: Carmen Gers (ENSafrica)

The Davis Tax Committee (“DTC”) issued a media statement on 25 April 2017, calling for written submissions on the introduction of a possible wealth tax in South Africa.

This proposal comes two months after an increase in the top income tax bracket for individuals by 4% to 45%, resulting in an effective capital gains tax (“CGT”) rate for individuals of 18%. This should be seen on the back of the increase the CGT rate by nearly 5% from 13.32% in 2014 to the current 18% in 2017.

It is understood that the background to the DTC being tasked to consider a wealth tax for South Africa is that “[t]he distribution of wealth in South Africa is highly unequal” and that “[i]t is well established that economic inequality inhibits economic growth and undermines social, economic and political stability”, in the words of Judge Dennis Davis, leading the DTC. 

Unlike income tax, where taxes flow from earnings (ie wages, salaries, profits, interest and rents), a wealth tax is generally understood to be a tax on the benefits derived from asset ownership. The tax is to be paid on the market value of the assets owned year on year, whether or not such assets yield any income or differently put, it is typically a tax on unrealised income.

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This article first appeared on ensafrica.com.


 

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