ANC revives plans for wealth tax to fund basic income grant

The ANC is reviving its proposal for an additional tax on the super wealthy to fund the basic income grant (BIG).

“BIG can be regarded as a mechanism to promote equity and thus a wealth tax can be a mechanism through which revenues can be raised to fund a BIG,” reads a proposal presented at the commission dealing with economic transformation at the governing party’s national policy conference in Nasrec this weekend.

The party first adopted this plan at its national conference in 2017, held at the same venue, calling “for an appropriately structured wealth tax, possibly linked to a land tax, to promote equity and raise revenues”.

Mmamoloko Kubayi, chair of the economic transformation subcommittee, told the Sunday Times that a wealth tax remained the preferred option to fund a BIG. She said the target should ideally be the top 5% of high net worth individuals, and estates with significant assets.

“The majority of the wealth of this country is in the hands of 5% of the population. That’s not right. We’ll have to have Sars [the South African Revenue Service] look into [a wealth tax].

"Are we not taxed like that in terms of income? Those who earn higher are taxed higher; the more you earn, the more you pay tax. It’s the same principle,” she said.

There have been growing calls from within and outside the party for the government to introduce a BIG to support South Africans who do not have a regular income.

The National Treasury has balked at the idea, arguing that it is unaffordable.

In February, President Cyril Ramaphosa announced that the R350 social relief of distress grant — introduced at the beginning of the Covid lockdown — would be extended for another year.

In its proposal to the policy conference, the ANC acknowledges that work will have to be done to determine who falls into the super-wealthy category.

“We must hasten to add that such a process is complex as it requires a guideline for identifying who would be subject to a wealth tax, and the criteria for selection of these persons.”

No, we would not support income tax or VAT increases because we believe South Africans are already over-burdened.

—  Mmamoloko Kubayi, chair of the economic transformation subcommittee

It noted that some economists had estimated that a properly structured wealth tax could raise R160bn a year.

According to a 2021 report by the Institute for Economic Justice (IEJ), a tax of 1% on the top 1% of South Africans in terms of wealth (about 350,000 people),  plus a tax of 3% on the top 0.1% of taxpayers (about 35,000 people), would raise R59bn a year.

The IEJ estimated that more than R300bn in revenue could be made available by cutting government wastage. 

It proposed a resource rent tax that could raise R38bn and a financial transaction tax that could net R41bn. It estimated that making pension fund contributions nondeductible for taxpayers at the top of the income ladder could yield a further R23bn.

Business Leadership SA and Business Unity SA have rejected these ideas and proposed — in a document released in June — that VAT be increased to 17% to fund a BIG.

Kubayi said the ANC was opposed to increases in personal income taxes or VAT because these would add an extra burden to already stressed households.

“No, we would not support income tax or VAT increases because we believe South Africans are already over-burdened. We can’t continue to make basic goods too expensive. With the petrol prices where they are, with the Ukraine-Russia war continuing, food prices have been going up.

“Almost all sectors have not been able to increase wages properly. When in a household income doesn’t increase but everything else does, they get deprived of basic necessities and we are likely to see high poverty levels. We can’t allow that.”

She stressed, however, that grants should be conditional and linked to some form of work or skills development programme.

“If it’s an able-bodied person they must be linked to some sort of work and skills training. A person who signs for BIG must sign an agreement to say I’m going to be linked to this skills centre; should they fail to comply they must fall off.”