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Debating a wealth tax: 'It raises a moral question in SA's unequal society'

3 May 2020 12:02 PM
Tags:
Poverty and inequality
SA inequality
Wealth tax
Judge Dennis Davis
COVID-19
Southern Centre for Inequality Studies

Judge Dennis Davis (Davis Tax Committee) weighs in on a study which finds 3,500 individuals own 15% of South Africa's wealth.

"The consequences of the COVID-19 lockdown are yet to be fully determined and understood. But one thing we can be fairly certain of – in South Africa its impact will be shaped by the country’s inequalities."

That's the introduction to an article published on theconversation.com arguing for why South Africa needs a wealth tax, right now.

The authors summarise their study (Southern Centre for Inequality Studies at Wits University) which shows that 3,500 individuals own 15% of the country's wealth. They propose the introduction of a progressive solidarity wealth tax.

Alexandra township residents gesture and chant slogans as they clash with the Johannesburg Metro Police on 3 April 2019 in Johannesburg, South Africa during a total shutdown of the township due to a protest against the lack of service delivery. Picture: AFP

Africa Melane gets input from Judge Dennis Davis, chairperson of the Davis Tax Committee.

While he disagrees with the figure posited in the article for income from a wealth tax, Davis does strongly believe in the concept of the tax in a society known as the most unequal in the world.

I think Covid-19 has shown just exactly what a dreadful mess we're in because of, well, 300 years but certainly even wasted years recently when inequality has not in fact not got better.

Judge Dennis Davis, Chair - Davis Tax Committee

Davis says this state of affairs raises a fundamental moral question:

Shouldn't people who really have immense amounts of wealth - and they're a very small percentage - be paying more to the national effort in order to reconstruct our society? Any decent person thinking about it should think very seriously about why we shouldn't have a wealth tax.

Judge Dennis Davis, Chair - Davis Tax Committee

Some callers questioned why, if taxes were paid by a generation, these people should still pay more?

Well, they're certainly paying income tax, that is true and they do pay VAT but everybody pays VAT. It is also true that more recently we've had a capital gains tax, but that hasn't been there forever... and you've got concessional taxes on dividends.

Judge Dennis Davis, Chair - Davis Tax Committee

Unrealised wealth is not taxed as opposed to income and it's unconscionable it seems to me that if you look at the statistics in a country like South Africa, number one lots of people are not paying that kind of tax. Let me give you an example: There seem to be only 6,000 people in the country who report income of more than R5-million.

Judge Dennis Davis, Chair - Davis Tax Committee

Now I challenge you just to take a drive when Covid-19 is over around Bishops Court, Constantia, Sandton, Bryanston, etcetera, and look at all those large homes. Seriously ask yourself: Have we got only 6,000 people who report taxable income of more than R5-million? I seriously doubt it.

Judge Dennis Davis, Chair - Davis Tax Committee

I think a whole lot of people, through accretion of capital that is not realised, that does not pay tax on that or pays it very late in the day, has estate duty that is very light and therefore there's huge transfer of wealth to the next generation that didn't earn it in the first place - all of that surely counts in circumstances in a country as unequal as ours.

Judge Dennis Davis, Chair - Davis Tax Committee

Davis concludes that surely we owe those people who essentially have suffered under 300 years of racist rule and those who came after, an obligation to reconstruct South African society.

If we've got more than they have, then we jolly well should make that contribution... We must have that debate because that's the debate that actually makes us into a nation of 60-million people, not a nation divided into those of us who are wealthy and those of us who are poor.

Judge Dennis Davis, Chair - Davis Tax Committee

Listen to the thought-provoking conversation on Weekend Breakfast with Africa Melane:


3 May 2020 12:02 PM
Tags:
Poverty and inequality
SA inequality
Wealth tax
Judge Dennis Davis
COVID-19
Southern Centre for Inequality Studies

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