Big tax changes coming for millionaires in South Africa – with help from the USA, UK, EU and China

South Africa Finance Minister Enoch Godongwana has joined several of his global counterparts in calling for cooperation to tax the world’s wealthiest people effectively.

Godongwana, along with the other global Finance Ministers, supported the G20 Ministerial Declaration on International Tax Cooperation.

The ministers’ declaration said that progressive taxation is one of the key tools in addressing domestic inequalities, strengthening fiscal sustainability, facilitating growth and allowing for the achievement of Sustainable Development Goals.

It added that international tax cooperation is crucial to improving domestic tax administration capabilities.

“Wealth and income inequalities are undermining economic growth and social cohesion and aggravating social vulnerabilities,” said the declaration.

“Several countries struggle to implement effective progressive tax policies to address these issues.”

“Moreover, the international mobility of ultra-high-net-worth individuals creates challenges in ensuring adequate levels of taxation for this specific group, impacting tax progressivity.”

“Promoting effective, fair, and progressive tax policies remains a significant challenge that international tax cooperation and targeted domestic reforms could help address.”

Thus, the G20 countries, which include South Africa, the USA, the UK, the EU, China, Australia, and more, will cooperate to ensure that ultra-high-net-worth individuals are effectively taxed.

UItra-high-net-worth individuals generally refer to those with assets that total $30 million (about R550 million).

“Cooperation could involve exchanging best practices, encouraging debates around tax principles, and devising anti-avoidance mechanisms, including addressing potentially harmful tax practices.”

“We look forward to continuing to discuss these issues in the G20 and other relevant forums, counting on the technical inputs of relevant international organizations, academia, and experts.”

Oxfam South Africa welcomed Godongwana’s support for the declaration.

Oxfam noted that South Africa is the most unequal country in the world when it comes to income equality.

South Africa has the highest Gini Coefficient —a statistical measure of how income is distributed in a country’s population — at 0.67.

Oxfam said that the country’s dollar billionaires’ combined wealth has increased by a third since 2020, while the bottom 99% have become poorer.

“This is serious global progress—for the first time in history, the world’s largest economies have agreed to cooperate to tax the ultra-rich. Finally, the richest people are being told they can’t game the tax system or avoid paying their fair share,” said Susana Ruiz, Oxfam International’s Tax Policy Lead.

“Governments have for too long been complicit in helping the ultra-rich pay little or zero tax. Massive fortunes afford the world’s ultra-rich outsized influence and power, which they wield to shield, stash and supersize their wealth, undercutting democracy and widening inequality.”

“Now to the next step: at the G20 Summit in November this year, leaders need to go further than their finance ministers and back concrete coordination: agreeing on a new global standard that taxes the ultra-rich at a rate high enough to close the gap between them and the rest of us.”

Taxman is on the case

The South African Revenue Service (SARS) has recently increased its compliance with High-Wealth individuals, intending to “follow the money.”

The South African Revenue Service (SARS) intends to ‘follow the money’, with High Wealth (HW) Individuals and Multi-National Enterprises (MNE) in the taxman’s crosshairs.

Jashwin Baijoo from Tax Consulting SA said that SARS intends to be the “catalyst to a more efficient and effective economy” by targeting the big-ticket taxpayers, including the rich, as their non-compliance with the law can translate to billions of rands being lost.

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