Worries over new tax will push wealthy South Africans to emigrate

As many countries attempt to recover from the economic fallout of the Covid-19 pandemic, the introduction of a wealth tax has become an increasingly popular solution to tackle this.

While some experts have concluded that a wealth tax could be a short-term tool to raise revenue, many others have also highlighted the concerns attached to the taxation, including a push for the wealthy to leave.

South Africa has become the latest country rumoured to introduce a wealth tax with a recent study by the World Inequality Lab demonstrating that the tax could generate up to R160 billion ($10.7 billion dollars).

Similarly, experts at the University of the Witwatersrand in Johannesburg have suggested establishing a progressive wealth tax for those earning above R3.6 million which accounts for 354,000 high-earners in the country.

While there have been no plans as yet to establish the levy, the nation has advanced on its ‘high wealth individual taxpayer’ division.

Announced during February’s Budget Speech, the segment is aimed at cracking down on individuals who have not declared all their income due to ‘complex financial agreements’.

The South African Revenue Service (SARS) has already begun to identify wealthy citizens who fall under this bracket, with many expected to receive their first letter soon.

Extensive studies have shown that South Africa’s wealthy population continues to decline with roughly 1,900 millionaires leaving since the last figure recorded in 2020.

New World Wealth’s Africa report shows a total of 4,200 high net-worth individuals have left the country over the last decade. With the possibility of higher taxes for the wealthy, this number is likely to grow.

“Applying further draconian tax laws on productive entrepreneurs is counterintuitive to creating a holistic economic development plan,” said Micha Emmett, chief executive of CS Global Partners and dual-qualified lawyer with decades of experience in investment migration

“This proposed move of SARS will create further mistrust in the government, driving more skilled professionals to explore other countries that offer an equitable and welcoming environment,” she said.

“Investors are looking at nations with better economic opportunities that allow them to protect their wealth in a politically and economically stable democracy.”

Read: SARS targets South Africans with money overseas – what to expect