[Letter] Taxpayers under pressure

The National Treasury estimates that 235,542 taxpayers contribute 33.1% of total individual income tax. Of 7,888,615 individual taxpayers, 569,351 contribute 49.1% of all personal income tax (2023/24 financial year).

Should a wealth tax be implemented, SA’s already greatly strained and narrow tax base will be subjected to yet more pressure. Some of the high-net-worth individuals may then see their lifestyle and investment options better served in other countries.

As tempting as it may be, a wealth tax would only be a temporary plaster on the gaping wound that is low economic growth. Implementing a wealth tax assumes that there is more tax to be gained from an extremely limited pool of taxpayers, and that the government spends the tax revenue it already collects in an efficient manner, with waste and corruption virtually nonexistent.

The latter is assuredly not the case; the former, if explored, could chase more taxpayers out of the country. High-growth reforms are there to be had. Pursuing the wealth tax route would send a macro signal that the government is unwilling to make the policy and legislative choices required to spur higher growth rates.

Letter originally appeared here.