Punishing the rich will retard SA’s urgent economic revival
Gunning for the small number of super-wealthy taxpayers is not the silver bullet it might seem
To his credit, the late AA Gill was not given to varnishing his journalistic impressions, and this much is true of his take on sun-kissed Monte Carlo, whose harbour he baldly describes as “in truth … an aquatic favela”.
Briskly demolishing the credibility of any claim the Monaco seafront might have made for jet-set classiness, Gill presents it as “a hugger-mugger horizontal tenement of ugly, awkward, moulded plastic bathroom fittings bobbing in cess. Both ex and the other sort.”
The rich of the Riviera, with their “frugality of “imagination”, didn’t impress him, it’s fair to say. What might be called gross wealth can be – and doubtless often is – vulgar.
Church reformer William Tyndale, strangled in 1536 for his trouble, and temerity, in rendering the Latin Bible in serviceable English, coined the phrase “filthy lucre”, and it’s one of many hundreds of his to have stuck in the centuries since.
But moralising about money is shot through with risks and deceits, too. The perennial clamour for a wealth tax, sounded again by Oxfam only last week, reflects the moral suspicion social reformers are fond of heaping on the rich.
Yet harping on the wealth gap between the high-net-worth few and the immiserated masses tells us much less than it might seem to about the socioeconomic deficiencies that remain SA’s pre-eminent challenge.
Shovelling assets from one side of society to another does not simultaneously transfer the skill, expertise, stamina and effort that will have gone into producing them – but penalising these qualities nullifies the scope for multiplying them.
Gunning for the small number of super-wealthy taxpayers (who are already taxed at a higher rate than wealthy people elsewhere) is not the silver bullet it might seem when the real problem is far too few South Africans earning enough to qualify as taxpayers at all. My colleagues estimate that about half a million individuals out of an adult population of near 30 million contribute over 60% of individual income tax.
A recent news report cited the 2017/18 budget review as showing that “just over 1.9 million registered taxpayers are estimated to contribute just over 80% of income tax”.
Would punishing the rich do anything for the economic growth and job creation needed to inflate those figures and deliver the outcomes the country desperately needs?
In fact, given that the very wealthy – the likes of Patrice Motsepe or Johann Rupert – are major players in the economy and signal agents of growth and investor confidence, a more punitive tax regime would actually retard SA’s urgent economic revival.
Whatever bleak catharsis sneering at the rich might promise, it is inescapable that under the best policy conditions wealth is the key driver of economic and social gains across all of society, and the mainstay of a stability in which tolerance and freedom prosper.
These gains depend, however, on retaining wealth as investment. Merely taxing it more (particularly under a government that is notorious for tolerating multibillion-rand waste and theft) will have the opposite – disastrous – effects.
It is perverse, then, that wealth rather than the policies that impede it should be regarded as the problem when the absence of wealth generation – not insufficient taxes on the generators – is the real source of poverty. And, needless to say, the dots trace back to policies that deter investment, such as expropriation without compensation and threats to raid pension funds.
Three years ago, the SA Revenue Service reported that, out of SA’s 3.7 million companies, 340 of the largest local corporations – just 0.2% of all local companies with positive tax income – paid 56.8% of corporate income tax. Each had reported taxable annual earnings of more than R200m.
It doesn’t take much imagining to recognise the positive impact of just doubling the small number of companies reporting annual income of more than R200m.
• Morris is head of media at the Institute of Race Relations.