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Increasing debt should be addressed by raising more resources from wealthy and high-income individuals and large profitable companies, which is also essential to reducing inequality, says the Budget Justice Coalition (BJC), a think tank representing various organizations, including Equal Education, Section 27, and the Institute of Economic Justice.
The BJC presented its views in a written response to the Medium Term Budget Policy Statement (MTBPS) from Finance Minister Tito Mboweni this week.
For the February 2021 budget, the National Treasury should seek more progressive taxes to generate additional revenue, he said. In the context of the current economic recession, the level of taxes on income, personal and corporate would be reduced.
“This requires seeking to tax historically accumulated income, through the implementation of a progressive net worth tax. In the medium term, it will be essential to increase taxes on high net worth individuals and increase the capacity of SARS to ensure tax compliance, ”said the BJC.
The group said there are thousands of South Africans who have net assets of $ 1 million or more, and 2,070 South Africans who have net assets of $ 10 million or more.
This shows that the country still has large sources of wealth, despite a weak rand and ongoing emigration of the very rich, with roughly 3,000 HNWI leaving South Africa over the past decade, he said.
“Implementing a progressive net worth tax could generate much-needed revenue and begin to redistribute some of the wealth from the very rich to the poor.
“Also, there are a number of high-income people who don’t pay taxes. For example, SARS has indicated that 20,000 people with incomes of more than 1.5 million rand are completely tax-free each year. “
Additionally, in addition to South Africa historically having much higher personal and corporate income tax rates, effective personal income tax rates have also declined substantially since the late 1990s, the BJC said.
If from an individual country’s perspective this makes sense – a reduced tax rate means less tax revenue and financial resources, but this is offset by a growing corporate tax base tied to new investments – from a global perspective, this has fueled a tax war. worldwide, it said.
“This has led countries to sacrifice critical tax revenues that could boost their revenues to go towards promoting socio-economic rights. This is a massive loss for public finances globally, and for South Africa in particular. “
The group argued that if the Corporate Income Tax rate was still at its previous levels of 50% in 1994 or 35% in 1999, an additional R410 billion (or R287 billion) could have been collected for the year. fiscal 2019/20. .
“With efforts currently underway in the OECD under the BEPS multi-stakeholder commitment to implement a global minimum corporate tax rate, South Africa must be at the forefront of this battle to push for such a rate to be as ambitious as possible.
“A global minimum corporate tax rate of 20 to 25% appears to be a progressive starting point that could increase over time.”
Read: The government wants to raise 40 billion rand through taxes, but where is it going to come from?
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