SA is not planning to have a G20 conversation about a wealth tax as Brazil did but will instead focus on measures such as exchanging information that allows for better taxation of the wealthy, Treasury director-general Duncan Pieterse says.
He also said in an interview that the real upside for SA of hosting the G20 was reputational. There were narrow economic spin-offs such as a boost to tourism.
“But it’s more about reputation, in terms of demonstrating our ability to mediate big, difficult global conversations. There’s a certain credibility and legitimacy that comes with that,” said Pieterse, who noted this would also come at a time when there was renewed confidence in SA.
The Treasury expects that SA’s hosting of the G20 will cost R1bn. But it is drawing on private sector sponsorship for some of this, especially sponsorship in kind — with Investec rolling out the red carpet, and the smoked salmon, to host this week’s meetings at its Sandton headquarters.
Pieterse said the sponsorships were being carefully managed in terms of a framework and instruction note agreed by the Treasury and the department of international relations & cooperation.
Brazil, which handed over the G20 presidency to SA last month, pushed hard for G20 countries to levy a 2% tax on the world’s billionaires to raise revenue that could be used to tackle poverty, inequality and climate change.
But while the idea of a global wealth tax attracted support from several G20 finance ministers including SA’s, it was roundly rejected by the US and others, with US treasury secretary Janet Yellen saying the US saw no need for a global initiative.
The G7 agreed on a global minimum tax rate of 15% for corporates a few years ago.
But in SA, while the Davis commission on tax flagged the need for SA to investigate a wealth tax, it estimated it would not raise much revenue.
A recent study by Treasury found that the government’s efforts to increase marginal tax rates for upper-income earners some years had the effect of reducing not increasing revenue collections from this segment.
Pieterse said there was a lot of support for a conversation about ensuring the wealthiest taxpayers globally paid their fair share, but SA’s presidency sought to take a different approach, and would not have a conversation any specific tax proposal.
“We’ve made it clear in our issues note on international tax that we think we can get a lot more traction at G20 level if we focus on things that allow for better taxation of the wealthy, like exchange of information,” he said.
“There’s a lot of support for an approach that says let’s use the co-ordination mechanism that the G20 provides to put in place some very specific mechanisms on information, transparency and so on.”
SA also plans to use this year’s presidency of the G20 finance track to foreground the Compact on Africa, which was agreed in 2017 during Germany’s G20 presidency.
The compact is chaired jointly by Germany and SA and aims to assist developing countries that apply to it with implementing reforms that will make them better able to attract investment.
Helping countries to boost their own reform efforts is expected to complement the G20’s efforts to tackle high and unsustainable debt levels.
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