Amid growing calls for a wealth tax targeting South Africa’s super-wealthy, legal experts at ENS Africa argue that the country already has multiple forms of wealth taxes in place. With Finance Minister Enoch Godongwana set to deliver the 2025 Budget Speech, the debate over whether to impose additional taxes on high-net-worth individuals has intensified. But are the rich already paying their fair share?
Existing Wealth Taxes in South Africa
South Africa’s tax system already includes several measures that effectively target the wealthy. These include:
- Progressive Personal Income Tax:
The highest marginal tax rate is 45% for individuals earning over R1.8 million annually. This is significantly higher than in many developing countries. - Estate Duty:
A tax on the estate of a deceased person, with an abatement of R3.5 million (unchanged since 2008). - Donations Tax:
A 20% tax on donations exceeding R100,000 (unchanged since 2008). - Capital Gains Tax (CGT):
A tax on the profit from the sale of assets, with rates up to 18% for individuals. - Transfer Duty:
A tax on property purchases, with a maximum rate of 13%—one of the highest in the world. - Securities Transfer Tax:
A 0.25% tax on the transfer of securities. - Luxury Goods Tax:
Excise duties on luxury items like high-end vehicles and alcohol, which have seen above-inflation increases.
The Impact of Bracket Creep
South Africa’s tax brackets have not been adjusted for inflation in recent years, leading to “bracket creep.” This means that as salaries increase with inflation, individuals are pushed into higher tax brackets without a real improvement in their standard of living. In the 2024/25 fiscal year, this mechanism raised an additional R16 billion in revenue.
In the original 2025 budget, Godongwana proposed below-inflation adjustments to tax brackets to mitigate this effect. However, with the revised budget, it’s widely anticipated that no adjustments will be made, allowing the Treasury to tap into this additional revenue.
Calls for a New Wealth Tax
Despite the existing taxes, several left-leaning organizations have called for a new wealth tax targeting the top 5% of earners. They argue that this would reduce the need for mass-impact tax hikes, such as increasing VAT, which disproportionately affect lower-income households.
In 2023 and 2024, the South African Revenue Service (SARS) began collecting data on high-net-worth individuals with assets exceeding R50 million. This initiative has already yielded billions in additional revenue by ensuring compliance. The Treasury is now analyzing this data to determine whether a formal wealth tax is necessary.
Why Adding Another Wealth Tax Could Be Counterproductive
ENS Africa warns that introducing another wealth tax could have unintended consequences:
- Emigration of Wealthy Individuals:
High-net-worth individuals may choose to emigrate, reducing the overall tax base and potentially harming the economy. - Complexity of Implementation:
Assets held in trusts or offshore could complicate the enforcement of a new wealth tax. - Diminishing Returns:
The existing tax system already extracts significant revenue from the wealthy. Adding another tax may not yield substantial additional funds.
What the Wealthy Get in Return
Despite their heavy tax burden, South Africa’s wealthy receive little in return due to widespread public service delivery failures. Many rely on private security, private healthcare, and private education to maintain their standard of living. This raises questions about the fairness and effectiveness of further taxing this group.
What to Expect in the 2025 Budget
While a new wealth tax is unlikely to be introduced in the 2025 budget, the Treasury may provide updates on its analysis of SARS data and signal future intentions. In the meantime, the focus will likely remain on optimizing existing taxes and addressing inefficiencies in public spending.
South Africa’s wealthy are already subject to a range of taxes that contribute significantly to the country’s revenue. While calls for a new wealth tax are understandable given the need for fiscal consolidation, the existing system may already be doing much of the heavy lifting. As the Treasury prepares its 2025 budget, the challenge will be to strike a balance between fairness, efficiency, and economic growth.
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