Children play on a small ball court in the informal settlement of Indlovu, in Khayelitsha, Cape Town. Picture: DAVID HARRISON
Children play on a small ball court in the informal settlement of Indlovu, in Khayelitsha, Cape Town. Picture: DAVID HARRISON

A wealth tax may help to tackle inequality but would not yield much revenue, according to Judge Dennis Davis.

Davis said at the Wits Business School on Monday night that the Davis Tax Committee had received more than 300 submissions about the proposed wealth tax.

"International evidence suggests that if you get 1% or 2% of your tax take as a wealth tax, that’s not going to solve the problem. That might help with the deficit but not more than that," said Davis.

The committee is set to meet EFF and trade union representatives on Tuesday.

Davis said wealth tax revenue would not come close to corporate or value added taxes, but would address issues of inequality.

His comments follow reports suggesting the South African Revenue Service (SARS) faces a revenue shortfall of as much as R50bn.

Something had to be done to address inequality in SA, said Imraan Valodia, dean of the Faculty of Commerce Law and Management, speaking on the same panel.

"A tax system should be one of the avenues we use to tackle that problem."

The level of inequality was rooted in the history of dispossession of people’s assets, he said. The politics of why SA should have a wealth tax was "abundantly clear".

Despite this, Valodia said that it would not help to try to collect large amounts of money from the proposed tax.

"You’re not going to earn a large amount of revenue from this and the reason is we have a relatively small number of really wealthy individuals. Unless you’re going to tax them at massive levels, which I don’t think you can do, I don’t think there’s enough wealth in SA."

He also said there were concerns SARS may not be capable of implementing a wealth tax.

Pundy Pillay, professor of economics and public finance, argued that it was purely a political ploy that governments would introduce a wealth tax but do nothing about correcting socioeconomic issues.

"When you dabble with things like the wealth tax, it can divert you from things that should be the focus of the government," said Pundy, citing the inability of the government to address the issues of poverty, unemployment and inequality.

"It’s not a priority. The priority is inequality ... and how we reduce inequality in a short space of time."

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