French economist Thomas Piketty aroused the idea of a wealth tax in his book Capital in the Twenty-First Century, and his philosophies have been widely quoted by DTC chair Dennis Davis.
The proposed forms such a tax may take in South Africa include a land tax, potentially just a tax on agricultural land, or land over a particular size, a national tax on the value of property (over and above municipal rates) and an annual wealth tax, basically an estate duty payable every year, not just at death.
The deadline for submission is the end of this month and a group of concerned tax and wealth professionals have already begun research and drafting submissions on this issue.
Keith Engel, CEO of the South African Institute of Tax Professionals, says these taxes would represent an additional charge on middle class and wealthier persons, depending on the threshold.
“All three (proposed) taxes are annual wealth taxes. The net result is another tax increase,” he says.
“Many people are now paying more than 50% of their income in tax once VAT and other indirect charges are being taken into account. A hefty new tax could be a breaking point for many.”
Given the huge amount of research required to determine the effect of a wealth tax the concerned tax group will be asking for an extension, says Dan Foster, tax director at law firm Webber Wentzel.
He says wealth taxes are not necessarily meant to raise lots of revenue, but are a form of social engineering.
“However, for the people that have to pay, it is quite painful. Bear in mind that it will be the middle class who will suffer, as with all taxes.”
