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Cosatu wants heavy tax for super rich

Monday, 10 February 2014   (0 Comments)
Posted by: Author: Wiseman Khuzwayo
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Author: Wiseman Khuzwayo

The Southern African Clothing and Textile Workers Union (Sactwu) and Cosatu want the rich and super rich taxed more, a higher tax on luxury goods, an increased corporate tax, and a zero rating for VAT on a wider array of basic goods.

In a joint submission on Friday to the Davis Tax Committee, Sactwu says tax reform cannot make the poor rich but can and must ensure tax efficiency and, in doing so, make a substantial contribution to job creation and resources.

Sactwu says, together with Cosatu, that such tax measures are necessary to develop a more transformative and distributionary tax system.

The submission has been obtained by Business Report.

It says that it is a well-known and damnable fact that South Africa is plagued by extremely high levels of unemployment and poverty, which undermine not only human dignity but also life and social cohesion.

"To compound matters, South Africa is one of the most unequal countries in the world. The country’s poor have seen their share of national income declining over time. And yet the fortunes of South Africa’s rich are very different.”

The trade union says that a recent report by New World Wealth suggested that the number of South Africans with more than $30 million (R331m) in net assets had climbed by 14 percent over the past six years.

The formation of the Davis Tax Committee, chaired by Labour Court president Judge Dennis Davis, was announced by Finance Minister Pravin Gordhan in February last year when the finance minister tabled the 2013/14 Budget and said the government would initiate a tax review "to assess our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability”.

Sactwu says that the taxation of the rich and super rich cannot be separated from the behaviour of companies that evade or avoid tax through tax havens abroad.

Tax evasion is a crime in South Africa, while tax avoidance is not.

"What is distinctive of the rich from a tax perspective is particularly the availability of a range of assets and income streams which make taxation more challenging.”

The union says there is a degree of consensus among commentators that some of the rich are not contributing the required amounts because they employ various forms of evasion and avoidance, which constitute an important source of revenue loss to the fiscus.

It notes that the SA Revenue Service has said much closer scrutiny would be placed on high-net-worth individuals, defined as those earning more than R7m a year or owning assets worth more than R75m.

Sactwu calls for the taxation of the richest 10 percent to rise from the current 58.6 percent to 60 percent, if not higher.

The trade union does not say by how much corporation tax should be raised.

It says the zero rating of VAT should be extended to another nine categories in order to help the poor.

The union also proposes higher VAT for luxury goods. A threshold should be set above which the goods would be classified as a luxury. 

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