BUSINESS NEWS - The compliance cost and market distortions associated with a wealth tax may exceed the benefits of introducing such a tax, practitioners have warned.
Against the background of the highly unequal distribution of wealth in South Africa, the Davis Tax Committee (DTC) has called for submissions on the desirability and feasibility of three forms of wealth taxes – a land tax, a national tax on the value of property (over and above municipal rates) and an annual wealth tax.
“It is well established that economic inequality inhibits economic growth and undermines social, economic and political stability,” it said in a statement.
Stakeholders have until May 31 to submit proposals. A workshop for oral submissions will be conducted in June.
South Africa currently has three forms of wealth taxes – estate duty, transfer duty and donations tax, which collectively account for roughly 1% of tax revenue. Although some commentators argue that capital gains tax (CGT) is also a wealth tax, the DTC is of the opinion that it is an income tax.
David Warneke, head of technical tax at BDO, says many of the limited number of countries around the world that have previously implemented a wealth tax, have abandoned it because the cost of compliance exceeds the yield from the tax.
