Can South Africa’s Unequal Society be Redressed?

It’s well-established that South Africa has one of the most unequal income distributions in the world. Despite significant efforts by the State to stimulate inclusive growth, the income gap between the rich and the poor has continued to widen in post-apartheid South Africa. A less explored topic is that of wealth inequality and, relatedly, the potential use of wealth taxation to reduce wealth inequality while also further diversifying the sources of much-needed government revenue. In 2015, the wealthiest 10% of South Africa’s population owned more than 90% of the total wealth in the country while 80% owned almost no wealth. These findings resonate with more recent findings documented in reports produced by Oxfam (2018) and the World Bank (2018). There’s a clear racial dimension to this inequality with an average African household holding less than 4% of the wealth held by an average White household. It’s a challenge to economic development when the bottom 80% of the population own no wealth, especially when a vibrant middle-class is a key ingredient in economic progression, as evidenced in advanced economies. If a non-zero wealth tax rate were to be applied, it should be progressive in nature, for example, by providing a high threshold below which no tax is payable. In turn, this data would provide the South African Revenue Service with improved data to test whether high net worth individuals are being taxed correctly within the income tax system.

SOURCES: QUARTZ AFRICA

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