Tax the Rich? South Africa Considers Wealth Tax to Tackle the Massive Revenue Gap! Image: Pintrest
(The Post News)- South Africa’s government hunt for long term revenue collection led the National Treasury to consider implementing a wealth tax to address the country’s R22.3 billion tax collection gap that was highlighted during recent discussions following the introduction of the Medium-Term Budget Policy Statement (MTBPS).
The MTBPS revised the country’s tax revenue estimates projecting that budget revenue over the next two years will fall short by an additional R31.2 billion. This underscores the challenges that the South African economy faces in the absence of accelerated growth and the persistence of external economic risks.
The 2024 Taxation and Revenue Proposals report released in September highlights that SARS made a progress in improving tax revenue collection since 2019/20. To enhance compliance processes and targeted audits, SARS established a dedicated unit during the sixth administration that focused on high-wealth individuals in accordance with the Davis Tax Committee.
Chris Axelson, acting head of tax and financial sector policy at the National Treasury shared that the South African Revenue Service will analyse data on high-net-worth individuals and the treasury will consider the possibility of a wealth tax once this data is finialised as reported by the Moonstone.
The potential wealth tax is seen as a way to generate additional revenue, which could help bridge the tax gap and fund critical public services and social programs as it aims to reduce income inequality. It also aims to reduce economic inequality. However, economists and tax experts have expressed strong resistance to the proposal, claiming that such a tax could have unexpected effects for South Africa’s already vulnerable economy.
A wealth tax, according to Roodt, may make the nation’s economic problems worse by eroding investor confidence and decelerating economic expansion as reported by Business Tech. Decisions made in the upcoming months will be critical to budgetary sustainability and economic inclusion to manage the National Treasury’s revenue deficit and balance the income tax equation. These decisions will pave the way for more policy adjustments in the 2025 budget.
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