South African Revenue Service (SARS) Commissioner Edward Kieswetter has shed light on the intricate challenges of introducing a wealth tax, stressing that such a tax is not a quick fix for the country’s fiscal concerns. Speaking at a joint parliamentary finance committee meeting, Kieswetter outlined the extensive groundwork required before a wealth tax could be implemented.
The Debate on Wealth Tax
Kieswetter acknowledged growing calls for a wealth tax but cautioned against the assumption that it would generate immediate revenue. “This is one of the areas where a deeper discussion is needed,” he stated, explaining that South Africa lacks a universal definition of wealth tax.
“We first need to define what a wealth tax is. Then, we must identify who it applies to, categorize the wealthy, and finally, build the capacity to administer it effectively,” he said. Without proper execution, he warned, such a tax could do more harm than good.
Where Does South Africa’s Tax Revenue Come From?
Kieswetter revealed that 48% of the R8 billion in personal income tax collected by SARS comes from individuals earning over R1 million annually.
“Almost half of our taxes come from only 570 individuals,” he noted, underscoring the significant contribution of South Africa’s ultra-wealthy to the national tax base.
Additionally, tax contributions from high-net-worth individuals account for 7.2% of taxed individuals and 3.9% of the employed population. SARS has identified 2,800 individuals who own assets exceeding R50 million, with R460 billion in local assets and another R150 billion in offshore holdings.
Existing Forms of Wealth Tax
While a dedicated wealth tax remains under discussion, Kieswetter pointed out that several existing tax measures already target high-net-worth individuals. These include:
- Estate duties – Taxes on inherited wealth.
- Donations tax – Levied on significant financial gifts.
- Capital gains tax – Applied to profits from asset sales.
- Equity transfer tax – Charged when trading shares.
- Property transfer duties – Levied on high-value real estate transactions.
SARS’ Crackdown on Tax Evasion and Uncollected Revenue
With an estimated R800 billion in uncollected taxes, SARS has requested additional funding to strengthen enforcement. Finance Minister Enoch Godongwana has allocated R7.5 billion to SARS, with R2 billion specifically earmarked for an aggressive debt recovery programme.
“We know that at least 30,000 individuals with economic activity exceeding R1 billion are not registered for tax,” Kieswetter disclosed. He also noted that 1,000 taxpayers previously classified as “not required to file” had since increased their economic activity but still fail to submit returns.
Investing in Technology and AI for Tax Compliance
To tackle tax evasion more effectively, SARS is investing in artificial intelligence and automation. These tools will enhance risk detection and streamline compliance enforcement.
Kieswetter emphasized the importance of modernizing SARS’ systems, stating, “We cannot pursue tax evaders without deep investment in technology.”
Looking Ahead
While discussions around a formal wealth tax continue, SARS is already implementing measures to ensure the wealthy contribute their fair share. With enhanced enforcement and digital advancements, the revenue service aims to close the tax gap and boost collections significantly.
