NEWS & ANALYSIS

SAFTU angered by shelving of wealth tax

Federation says such a tax would make a statement of solidarity to redress the wrongs of the past

SAFTU angered by shelving of wealth tax

The South African Federation of Trade Unions is deeply disappointed that the Davis Tax Committee has concluded that South Africa is “not ready” for a wealth tax in the foreseeable future.

The committee said this despite recognizing the “disturbing levels of wealth inequality” in the country. It repeated statistics which SAFTU has often quoted - that “the wealthiest 10% of the population owns more than 90% of the wealth”.

An editorial in the pro-wealthy Business Day produced even more dramatic evidence of this level of inequality:

“Among the 149 countries that the World Bank ranks for relative inequality, SA is the highest, followed closely by neighbours Namibia and Botswana. When wealth inequality is measured, the picture is even more unequal and SA has a Gini coefficient of 0.9 — higher than global inequality overall.”

It even quotes French economist Thomas Piketty, who showed that it is wealth rather than income that has been identified as the bigger culprit in fuelling inequality and says that “In SA, this is overlaid with a history of racially based wealth accumulation. Not only do rich people stay rich because they inherit wealth, but white people, in general, stay rich, while black people, in general, stay poor”.

Yet after giving all these good reasons for introducing a wealth tax, this big business flagship agrees with Davis that we are “not ready” for one. 

Who is “not ready” for a tax which would start to cut this huge wealth gap which we inherited from apartheid and is getting even worse? The answer is that it is the wealthy themselves, who will always find reasons and excuses to stop anything that reduces their riches.

The poor majority of South Africans are not just “ready” for a tax which will redistribute wealth: they desperately need it so that they can escape from unemployment, poverty and hunger.

  • The 30.4 million South Africans, 55,5% of the population, who live below the upper-bound poverty line of R992 a month are ready for a wealth tax;
  • The 26% of South Africa's population who are hungry on a daily basis are ready;
  • The 9.2 million unemployed, 36.3% of the working population by the more realistic expanded definition, are ready;
  • The parents who struggle to find the money to send their children to dilapidated schools are ready;
  • The patients who have to endure long queues and poor service in under-staffed hospitals, are ready;
  • The commuters who risk their lives every day in overcrowded trains and death-trap taxis are ready.

Even Business Day has to concede that “to many a wealth tax looked like a ready-made solution and is a measure that would certainly win broad appeal. The committee’s recommendation against it will not go down well”. They certainly will not!

Although a wealth tax alone would not solve all these social problems, it would both make a statement of solidarity to redress the wrongs of the past and address service delivery backlogs. It would provide the exchequer with money to improve public services, increase social grants, create more jobs and kick-start moves to create a more equal society. 

This would be the exact opposite of the direction in which the government is moving now. It has just increased taxes, including the least progressive tax, VAT, which hits the poor hardest, which has widened inequality, and it is cutting back rather than increasing spending on public services.

SAFTU rejects the excuse offered by both the Davis Committee and Business Day for shelving a wealth tax - the difficulty and cost to SARS of classifying and measuring people’s net assets. 

The fact that the rich are so clever at hiding their wealth is no justification for not taxing it. The same argument could be used as a reason not to collect other taxes on the rich - estate duty, donations tax, securities transfer tax and transfer duties - which in any case raise at present raise a tiny proportion of total taxes (1.4% in 2016-17).

The Davis Committee suggests that the SARS begin by collecting information on taxpayers’ assets in preparation for a possible wealth tax in the future. But why is SARS not doing that already? It must be given additional powers to track down all the income and wealth of South Africa’s super-rich elite, far too much of which is disappearing from the country into tax havens.

When discussing wealth let us never forget that the world’s, and South Africa’s, wealth is the surplus value created by the labour of the working class. The call for a wealth tax is not an appeal for charity from the capitalists, but for more of the wealth created by the workers to be paid back to them and to society as a whole, especially to the poor and needy.

Taxes cannot be viewed in isolation from ownership. For as long as the country's resources are owned by unaccountable, capitalist monopolies, which in South Africa still mainly white owned, inequality is inevitable.

The is why the Freedom Charter said that “the national wealth of our country, the heritage of all South Africans, shall be restored to the people”, which the SAFTU founding congress expressed in the demand for “the nationalisation of the mineral and manufacturing monopolies, the banks and the land”.

Wealth belongs us all and must be democratically controlled and distributed to society as a whole. That is ultimately the only way to create a really equal society.

Statement issued by Zwelinzima Vavi, SAFTU General Secretary, 13 April 2018