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As Gwen Ngwenya stated in her response to Merle Lipton, up-to-date facts are crucial (“Lipton’s DA is a straw man”, January 20). Lipton presents a case for higher wealth taxes, especially estate duty, on SA’s super wealthy. However, she appears to be following an old trope.
Our estate duty rate was indeed low in the past, but rates have risen, and a capital-gains tax has been introduced. Capital gains tax rates have also risen in recent years. In addition, we have ever higher rates of property transfer tax. At present these escalate to a maximum of 13% on property sales, to the extent that the consideration exceeds R11m.
Another ever-rising tax on the wealthy (but seldom recognised as such) comprises annual property rates, which for expensive properties can exceed the actual cost (so-called user charges) of municipal services. To the extent that these taxes exceed a fair user charge, they would constitute an annual wealth tax.
In considering the fairness or otherwise of taxes on the rich, we should therefore take into account annual property rates, together with property transfer tax on sales. The average South African moves home every five years, thus attracting fairly frequent transfer duties, and possible capital gains tax on larger properties.
We should also recognise that estate duty reaches a maximum rate of 25% (over R30m) and further that a maximum rate of capital gains tax of 18% is payable on death, together with estate duty. It is therefore apparent that wealth taxes in SA are already substantial.
I have little doubt that further increasing the rates of any or all of these wealth taxes would be self-defeating. The wealthy can simply emigrate, or attempt to avoid or evade the tax.
Rather than increase existing wealth taxes we should concentrate on enforcing disclosure of hidden wealth. Much hidden wealth is held offshore, and some may constitute the proceeds of crime. Taxing this hidden wealth would enhance equity and thus engender better tax compliance.
In addition, it would garner far more revenue than would result from increasing the rate of tax on the already compliant.
Willem Cronje Cape Town
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
LETTER: Wealth taxes are already substantial
As Gwen Ngwenya stated in her response to Merle Lipton, up-to-date facts are crucial (“Lipton’s DA is a straw man”, January 20). Lipton presents a case for higher wealth taxes, especially estate duty, on SA’s super wealthy. However, she appears to be following an old trope.
Our estate duty rate was indeed low in the past, but rates have risen, and a capital-gains tax has been introduced. Capital gains tax rates have also risen in recent years. In addition, we have ever higher rates of property transfer tax. At present these escalate to a maximum of 13% on property sales, to the extent that the consideration exceeds R11m.
Another ever-rising tax on the wealthy (but seldom recognised as such) comprises annual property rates, which for expensive properties can exceed the actual cost (so-called user charges) of municipal services. To the extent that these taxes exceed a fair user charge, they would constitute an annual wealth tax.
In considering the fairness or otherwise of taxes on the rich, we should therefore take into account annual property rates, together with property transfer tax on sales. The average South African moves home every five years, thus attracting fairly frequent transfer duties, and possible capital gains tax on larger properties.
We should also recognise that estate duty reaches a maximum rate of 25% (over R30m) and further that a maximum rate of capital gains tax of 18% is payable on death, together with estate duty. It is therefore apparent that wealth taxes in SA are already substantial.
I have little doubt that further increasing the rates of any or all of these wealth taxes would be self-defeating. The wealthy can simply emigrate, or attempt to avoid or evade the tax.
Rather than increase existing wealth taxes we should concentrate on enforcing disclosure of hidden wealth. Much hidden wealth is held offshore, and some may constitute the proceeds of crime. Taxing this hidden wealth would enhance equity and thus engender better tax compliance.
In addition, it would garner far more revenue than would result from increasing the rate of tax on the already compliant.
Willem Cronje
Cape Town
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
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