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Privilege and inheritance: Time to disrupt intergeneration transfers of wealth?

11 June 2020 6:44 PM
Tags:
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Has the time come to start reimagining how we deal with the transfer of intergenerational wealth?

A recent article by Pierre De Vos, who teaches Constitutional law at the University of Cape Town Law Faculty, suggests the time has come to reimagine how we deal with the transfer of intergenerational wealth.

He states that the transfer of wealth between generations increases inequality and makes it more persistent across generations.

''In South Africa, the problem has an acute racial dimension, as the transfer of intergenerational wealth is a significant mechanism through which subsequent generations of white South Africans are able to retain and further boost our economic privileges accumulated over generations of colonial and apartheid rule.''

Here are two views on the issue.

I definitely can see the need for it economically-speaking...the inequality we are in is not a result of people not having worked hard or not being smart enough, it's largely because of the legacy of apartheid.

Siya Biniza, Founder and Executive Director - PESA

So I am definitely in support of a way to use inheritance taxes as a way to ease some of that inequality.

Siya Biniza, Founder and Executive Director - PESA

Until we deal with inequality we won't be able to restart the economic engine...

Siya Biniza, Founder and Executive Director - PESA

We do have a low threshold of inheritance tax in South Africa - will increasing it help eradicate inequality?

And what about the disincentive issue - will you work as hard if you know you cannot leave enough for your children to have a better life?

There are different areas of argument..the argument about principle and the argument about pragmatics... we do think there is something wrong that you have two people experience substantial different qualities of life depending on who their parents were...

Stuart Theobald, Financial Analyst and Chairman - Intellidex

The principle argument I think is not clear and when it comes to inheritance we don't think the children should be kicked out of the family home because the parent died... there are certain things that are right to pass on to children.

Stuart Theobald, Financial Analyst and Chairman - Intellidex

In the United States you can transfer over five million dollars tax free to your children - in South Africa the threshold is much lower...

Stuart Theobald, Financial Analyst and Chairman - Intellidex

Our problem is inequality and poverty - is inheritance tax really going to deliver a major amount... the tax is not going to amount to much... is it really an effective way to deal with inequality, I need to be convinced.

Stuart Theobald, Financial Analyst and Chairman - Intellidex

Listen to the full interview below.

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This article first appeared on 702 : Privilege and inheritance: Time to disrupt intergeneration transfers of wealth?




11 June 2020 6:44 PM
Tags:
Lockdown
COVID-19

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