In my previous column, I argued that SA needs a wealth tax, because, frankly, asking the rich to contribute a bit more isn’t exactly radical. It’s common sense.
But let’s get real — designing and implementing one isn’t as simple as slapping a new line item on the tax return. The real challenge shouldn’t be convincing people that inequality is a problem (just travel outside your little bubble and it will be obvious). It’s answering the inevitable chorus of “but how?” and “won’t the rich just run away?” Shorthand for “don’t touch me on my studio”.
Yet a well-designed wealth tax isn’t just a grab for cash; it’s a carefully calibrated instrument that should address who pays, what’s taxed and at what level. Most proposals suggest taxing the ultra-rich — say, the top 1% or even 0.1% of South Africans. So if you’re sweating, take a breath — you’re probably not the target.
The target taxes would include assets such as real estate, shares, trusts and offshore holdings. Liabilities would be deducted, so the genuinely indebted aren’t unfairly hit. The challenge is valuing assets accurately. Shares are easy; artworks, private businesses and crypto, not so much. But the SA Revenue Service already assesses wealth for estate duties, so it’s not impossible.
International examples suggest 1%-3% annually on net assets above the threshold. Before its wealth tax was scrapped in 2017, France applied a sliding scale from 0.5% to 1.5% on fortunes over €1.3m, and now French legislators have voted in favour of a new 2% wealth tax on the assets of the super-rich.
The quantum of tax in SA would need careful consideration. To prevent capital flight it may be necessary to tighten capital controls — cracking down on aggressive tax avoidance. International co-operation and incentives to remain would be key.
Wealth taxes can actually encourage investment by discouraging hoarding. If an asset is going to be taxed whether it’s sitting idle or not, there’s more reason to put it to productive use. So, a well-structured tax won’t send the JSE crashing.
But even the best-designed wealth tax won’t fix our fiscal crisis if it’s just feeding a leaky bucket — it must go hand in hand with a war on corruption. No-one wants to pay more tax only for it to vanish into dodgy tenders.
Proper oversight — perhaps a ring-fenced fund for education, healthcare and infrastructure — could help, and better land taxes, luxury goods taxes and digital economy levies could complement the effort. Countries that successfully redistribute wealth (think Scandinavia) don’t just tax more — they spend better.
Some will cite France’s scrapping of their wealth tax. The mistake wasn’t the tax itself — it was that France applied it too broadly and without international co-ordination. SA can avoid that by setting a high enough threshold to avoid spooking the upper-middle class, targeting extreme wealth without discouraging local business growth, and pairing it with strong anticorruption and investment incentives.
A wealth tax isn’t a silver bullet; it’s a sensible step. With smart design, strong enforcement and complementary policies it can work — without sending billionaires packing or tanking the economy. So let’s stop pretending that economic growth alone will magically fix inequality and start ensuring that growth works for everyone, not just those at the top.
It’s also about balancing power. When too much wealth is concentrated in too few hands it doesn’t just skew the economy; it tilts democracy itself. Take Elon Musk, David Sacks and Patrick Soon-Shiong — all SA-born billionaires who wield enormous influence in tech, media and political circles. Their economic muscle gives them disproportionate sway.
In SA, moneyed interests already play an outsize role in shaping national policy, whether through lobbying, political donations or patronage networks. A well-calibrated wealth tax can act as a democratic safeguard, ensuring that extreme wealth doesn’t translate into unchecked political power.
• Cachalia is a former DA MP and public enterprises spokesperson.
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