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An annual wealth tax on the net worth of South Africa’s richest people could raise up to R160 billion ($ 10.7 billion) and reduce inequality in a nation where the richest 1% of the population owns 55 % of personal wealth, a study showed. .
The study, conducted by groups like the Global Inequality Lab, of which Thomas Piketty is co-director, assessed personal wealth in South Africa and proposed a range of taxes on net wealth of more than R3.82 million, or the top 1% of the population. population.
South Africa is one of the most unequal nations in the world, a legacy of the apartheid system of racial discrimination that disadvantaged the black majority and ended in 1994. The concentration of wealth is more extreme than in France, the United States, the United Kingdom , Russia, China or India, and has not decreased since 1993, according to the study published Wednesday.
In the moderate tax scenario, around 350,000 people would be subject to the tax, with a level that would vary between 3% and 7% depending on the influx. The maximum rate would apply to people with a net worth above R146.89 million and would only apply to wealth above that level. Raising R160 billion in taxes would equal 3.5% of gross domestic product, according to the study.
Record shrinkage
“A progressive wealth tax focused on those most able to pay would be an important policy tool to finance debt reduction,” he said. It would spare the “most vulnerable households, thus placing South Africa in a better position for an economic recovery.”
The government estimates that South Africa’s economy has contracted the most in nine decades due to the coronavirus pandemic.
The study was written by Amory Gethin from the World Inequality Lab, which is linked to the Paris School of Economics, together with Aroop Chatterjee from the South Center for Inequality Studies at the University of the Witwatersrand in Johannesburg and Leo Czajka from the Universite Catholique de Louvain in Belgium.
A wealth tax would face challenges, the authors said.
Some wealthy South Africans would leave and others would find ways to get around it, and the amount of personal wealth targeted by such a tax could fall by 30%, Czajka said in an interview. Still, the tax revenue would be considerable, he said.
South Africa is a good candidate for a wealth tax because its income disparity means that relatively few people would be affected, and the quality of data collection by the tax authority is superior to that of some high-income nations, he said. Chatterjee in the same interview.
© 2021 Bloomberg
