Wealth tax on the rich in South Africa shot down
Finance Minister Enoch Godongwana says the government is currently not considering a wealth tax, noting that it has been ineffective in several international markets.
The concept of wealth taxes has gained popularity worldwide amid growing global economic inequality. South Africa has some of the highest income inequality in the world.
Responding to questions from the EFF’s Carl Niehaus, Godongwana said that there are currently several instruments that comprehensively tax wealth in the country.
He said that wealth is taxed through a combination of asset taxes: estate duties levied on assets at a person’s death, donation taxes, security transfer taxes, and transfer duties for real estate.
He added that all real estate, land and buildings are taxed at the local level through property rates and taxes.
The total annual tax revenue collected from the four national wealth taxes, excluding local property taxes, amounted to R21.3 billion in 2024/25, down slightly from R22 billion in 2021/22.
“This is a contribution of 1.15 per cent to total tax revenue, which compares favourably to the OECD average of 0.5 per cent for similar taxes,” the Minister said.
“In addition, South Africa levies capital gains tax, which is essentially a tax on wealth gains. Capital gains contributed an additional R15.6 billion to the fiscus during 2019/20 and R16.4 billion in 2020/21.”
Godongwana added that international evidence shows that several countries have abandoned or reduced the scope of their wealth taxes over the years because they proved ineffective.
This resulted in countries implementing inheritance tax/estate duty, or other measures, or doing so altogether.
While 12 countries had a wealth tax in 1990, only Norway, Switzerland, Spain and Colombia have one today.
The main reasons for abolishing wealth taxes include the high cost of collection, administrative complexity, the risk of capital flight, limited revenue, and negative impacts on economic growth.
“Due to their impact on savings and capital formation, studies for the UK, Germany and the U.S. suggest a reduction in GDP growth,” the Minister said.
“Growing tax revenue depends on economic growth, so any reductions in economic growth would negatively impact tax revenue.”
Stay focused on income taxes
The Minister added that a study on net wealth taxes in the OECD found that a comprehensive income tax system that taxes capital gains is better.
This system is more effective at generating revenue and redistributing wealth than taxes that specifically target the stock of wealth, he said.
He added that the nation already has a comprehensive and highly progressive income tax system, with top earners paying a top marginal rate of 45%.
“In line with international best practice, South Africa levies capital gains tax to ensure the income tax system is sufficiently progressive and comprehensive.”
“Income tax is the most effective way to tax the wealthy, and it generates multiple times more revenue for the fiscus in a more efficient and cost-effective manner.”
He said that wealthy taxpayers contribute the largest amount to personal income tax in South Africa, which is the norm in many countries.
The 2026 Budget showed that the top 13% of taxpayers contribute 60% of total personal income tax revenue.
“It is this tax base that will be most at risk of relocating with the introduction of a wealth tax.”
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