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Would Nene consider a wealth tax?

Tuesday, 20 October 2015   (0 Comments)
Posted by: Author: Ingé Lamprecht
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Author: Ingé Lamprecht (Moneyweb)

As French economist Thomas Piketty’s suggestion seems to find favour in certain political circles?

The term "wealth tax” has almost become a new catchphrase over the last few weeks.

This followed after French economist Thomas Piketty mooted the idea as one of the measures to reduce inequality in South Africa during his recent visit to the country.

Piketty’s views have been criticised on many fronts, but his suggestions around a wealth tax seem to have struck a chord with the ANC and Cosatu, even if at this point it may only be something they believe should be considered.

Which bodes the question: Is the introduction of a wealth tax something finance minister Nhlanhla Nene would have pondered when he takes to the podium to deliver his Medium-Term Budget Policy Statement (MTBPS) in Parliament on Wednesday?

Without doubt, Nene will be under significant pressure. Since his budget speech in February, the economic growth outlook has deteriorated significantly and he will likely be forced to (again) revise his projection lower from 2% to around 1.5% for 2015 (in line with revisions by the World Bank, the International Monetary Fund and the Reserve Bank).

Despite shrinking in the second quarter of this year, the economy is not officially in recession (defined as two consecutive quarters of contraction). The country does however find itself in "recessionary conditions”, says Lesiba Mothata, chief economist at Investment Solutions.

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