British think tank and charity group Oxfam has published its latest wealth inequality report ahead of the 2019 World Economic Forum meeting in Davos.
The 2019 report claims that global wealth is becoming more concentrated among a few elite, while the poorest half of the world continues to suffer.
According to Oxfam, the world’s billionaires saw their collective wealth increase by $900 billion in 2018, averaged out at $2.5 billion a day. The poorest half of the world (3.8 billion people), meanwhile, saw their collective wealth decline by 11%, the group said.
Further, some 3.4 billion people live on less than $5.50 a day.
“Billionaires now have more wealth than ever before. Between 2017 and 2018, a new billionaire was created every two days,” the group said.
“Wealth is becoming even more concentrated – last year, 26 people owned the same as the 3.8 billion people who make up the poorest half of humanity, down from 43 people the year before.
“The world’s richest man, Jeff Bezos, owner of Amazon, saw his fortune increase to $112 billion. Just 1% of his fortune is the equivalent to the whole health budget for Ethiopia, a country of 105 million people.”
Oxfam said that while the richest continue to enjoy booming fortunes, they are also enjoying some of the lowest levels of tax in decades. Despite this, they continue to hide their money rather creatively, with an estimated $7.6 trillion hidden offshore.
“The super-rich are hiding $7.6 trillion from the tax authorities. Corporates also hide large amounts offshore. Together this deprives developing countries of $170 billion a year,” the group said.
Money is often kept offshore as a way to minimise or evade paying tax completely – but Oxfam said that wealth taxes are not high enough and should be increased.
“Wealth is particularly undertaxed. Only 4 cents in every dollar of tax revenue comes from taxes on wealth,” it said.
“In some countries like Brazil and the UK, the poorest 10% are now paying a higher proportion of their incomes in tax than the richest 10%.
“Governments should focus their efforts on raising more from the very wealthy to help fight inequality. For example, getting the richest to pay just 0.5% extra tax on their wealth could raise more money than it would cost to educate all 262 million children out of school and provide healthcare that would save the lives of 3.3 million people.”
Taxes on the wealthy in South Africa
According to Oxfam, in rich countries, the average top rate of personal income tax fell from 62% in 1970 to 38% in 2013. In developing countries, the average top rate of personal income tax is 28%.
Compared to both these figures, South Africa has a particularly harsh tax on high-income earners, with the top bracket being for 45%, for those earning R1.5 million a year or more.
The R1.5 million limit is also much lower than other countries – in the United States, for example, the highest bracket (less than 40%) kicks in at R6 million income per year.
Even the second-highest bracket (41% for those earning R708,000 and higher) is more than the global average.
In the 2017/18 financial year, SARS drew in R1 216.5 billion in taxes, 38.1% (R463 billion) of which came from personal income tax.
Of the taxable income assessed (76.5% of the total – R321.4 billion) those earning above R1 million a year accounted for over 36% of the amount received in tax.
Specific taxes aimed directly at the wealthy – in the forms of Transfer Duty, Estate Duty and Donations Tax – however these currently raise very small amounts of tax revenue.
Of the reported figures, Capital Gains Tax for individuals amounted to R10 billion in 2017/18, and Transfer Duties amounted to R7.7 billion.
In previous years, Oxfam highlighted how South Africa’s richest 10% receives half of all wage income, while the bottom 50% of the workforce receives just 12% of all wages.
Oxfam’s assessment of wealth has been criticised by those it targets as a “perverse obsession about the rich”, while disregarding the wealth they have generated, jobs created and taxes paid.