Good news for the top 1% in South Africa
Finance Minister Enoch Godongwana has doubled down on this stance that introducing a wealth tax is not viable in South Africa.
This follows his previous comments at the beginning of the year, in which he stated that South Africa already taxes the rich heavily.
In a parliamentary Q&A, Godongwana said that, despite calls for new taxes targeting the ultra-wealthy, the country already collects substantial revenue from high-income earners through an established and progressive tax system.
The minister was pressed on why he continues to reject the idea of a wealth tax, given that the country’s existing instruments—donations tax, securities transfer tax, transfer duty, and capital gains tax—collectively account for less than 6% of total revenue.
This is despite the fact that around 55% of South Africa’s wealth is concentrated among about 1% of the population.
In response, Godongwana said the framing is misleading, insisting that South Africa already taxes the wealthy at levels comparable to or higher than many rich countries.
He pointed out that the suite of taxes aimed at wealth currently brings in revenue equivalent to 1.15% of GDP, which is more than double the OECD average of 0.5% for similar taxes.
These include donations tax, transfer duty, estate duty and securities transfer tax. Earlier this year, he noted that municipal property rates and capital gains tax further add to the total.
“South Africa’s taxes targeting wealth collect revenue equivalent to approximately 1.15% of GDP, which is comparable to the OECD average,” he said.
“Only four countries—Norway, Spain, Switzerland and Colombia—levy annual wealth taxes. International experience shows that annual wealth taxes generate limited revenue and are costly and complex to administer,” he added.
To illustrate this, Godongwana pointed to Spain, where the country’s wealth tax generated just €619 million in 2023—approximately 0.04% of GDP—while income tax brought in €130 billion.
According to Godongwana, this is proof that trying to tax net wealth directly is far less effective than relying on a well-designed income tax system.
More harm than good
He noted that South Africa already has one of the most progressive income tax regimes in the world.
High-income earners contribute the lion’s share of personal income tax, with just 12% of taxpayers accounting for more than 60% of all individual income tax collected.
This alone represents 23% of total tax revenue—far exceeding anything a wealth tax could deliver.
He also noted that the four national wealth taxes have been consistently contributing between R19 billion and R23 billion per year.
Capital gains tax added a further R15.6 billion to R16.4 billion annually. Godongwana argued that these figures show the existing framework already captures both income and wealth in a balanced way.
The international trend, he added, reinforced this point. Several countries that once experimented with wealth taxes abandoned them after facing high administrative costs, minimal revenue gains, capital flight and legal complexity.
Only a handful of countries globally still enforce true wealth taxes, and most advanced economies rely instead on progressive income tax systems supported by capital gains tax.
“Income tax is the most effective way to tax the wealthy. It generates significantly more revenue for the fiscus in a more efficient and cost-effective manner,” he said.
National Treasury has echoed this and has stressed that the risks of introducing a wealth tax could far outweigh the benefits.
Treasury warned that if just 10% of high-income earners emigrated in response to such a tax, South Africa could lose up to R49 billion a year in personal income tax alone.
This amount also excludes the other taxes these individuals pay and the broader economic impact of losing their investment and spending power.
Treasury’s projections for 2025/26 show that the top three income tiers will contribute close to R500 billion in personal income tax, accounting for more than 60% of the total.
Against this, the existing wealth-related taxes deliver only between R20 billion and R24 billion annually.
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