Calls for South Africa to introduce a wealth tax have intensified amid budget shortfalls and staggering inequality.
But Finance Minister Enoch Godongwana has doubled down on income tax as the most efficient way to collect from the rich — arguing that it generates significantly more revenue, costs less to administer, and comes with fewer economic risks, as reported by Daily Investor.
Responding to a Parliamentary question from MK Party MP Sanele Mwali, Godongwana rejected the idea of imposing a direct tax on personal fortunes. Instead, he defended the country’s existing system, which already captures wealth through multiple channels — including estate duty, donations tax, capital gains tax, and levies on property and securities transfers.
These taxes collectively brought in R21.3 billion in the 2024/25 financial year, down from R22.6 billion the year before, and slightly below the 2021/22 figure of R22 billion. Still, Godongwana pointed out this 1.15% slice of the total tax pie compares favourably with the OECD average of just 0.5% for similar wealth-based taxes.
South Africa’s income tax system is highly progressive, with the wealthiest individuals paying up to 45% in personal income tax. When paired with capital gains tax and dividend taxes, it forms what the minister calls a comprehensive taxation framework that already targets wealth in multiple forms.
But this might not satisfy campaigners who believe a specific tax on net worth would more directly address the country’s glaring economic inequality. Advocates say such a tax could ease the burden on working-class South Africans, shift focus to the super-rich and help fund critical public services.
Opponents, however, argue the reality would be far messier. ‘There are only around 2 850 South Africans with net assets above R50 million,’ Godongwana said. ‘If they relocate to avoid the tax, we risk losing R7 billion in annual income tax — not to mention investment, business activity, and jobs.’
The group collectively holds R245 billion in local assets and R150 billion abroad, making them mobile and sensitive to tax hikes. The minister also warned that a wealth tax could hurt the country’s already low savings rate, which lingers at just 13.7%.
Global trends back up his position. Only four countries currently enforce true wealth taxes, as many have abandoned them due to their administrative complexity, limited yield, and the risk of capital flight. France, for example, replaced its wealth tax with a real estate tax after seeing billionaires pack up and leave.
Godongwana emphasised that South Africa should not follow a path proven to fail elsewhere. Instead, he urged the country to improve compliance and modernise revenue collection mechanisms to get more out of the existing system.
The National Treasury is actively looking for new revenue sources ahead of the 2025 Budget. While a hike in VAT was proposed early on, the political backlash has left that idea on shaky ground. For now, the government appears committed to milking more out of income tax, not introducing new taxes on the rich.
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Picture: Jeffrey Abrahams / Gallo Images
