Economy

New Wealth Tax?

Posted on August 19, 2011. Filed under: Economy, Reparations, Transformation |

Kate Lefko-Everett

Over the last week or so, IJR Patron and Archbishop Emeritus Desmond Tutu has provoked a national conversation on the prospect of a ‘wealth tax’ imposed on affluent white South Africans, which he suggests would advance ubuntu and reconciliation while contributing to ‘the national effort to uplift the poor’. (more…) In an article in the Cape Times this morning, he traces this proposal to the 1998 recommendations of the Truth and Reconciliation Commission (TRC) in which ‘the idea of a tax for whites, as a form of reparation, [was] raised’.

Interestingly, this recommendation has come at a time when the global economy has suffered a further round of serious instability, South African labour strikes for wage increases have again become acrimonious, and American billionaire Warren Buffett has called on the US government to ‘stop coddling the super-rich‘ and ‘get serious about shared sacrifice’.

Tutu’s recommendation has been met with both firm support and staunch opposition. The FW de Klerk Foundation, for example, has described it as contradictory to the constitutional principle of non-racialism, and raises the following questions:

‘Would whites who opposed apartheid be expected to pay the same as those who supported it? Would there be different tax scales for whites who supported the ANC, the DP and the old National Party? And what about the many blacks who held well-paid positions in homeland governments?’

The Freedom Front + has called the proposal ‘racist and thoughtless‘.

However, proponents have also emerged including law professor Pierre de Vos, who has challenged the constitutional argument put forth by the FW de Klerk Foundation. Further, de Vos has described Tutu’s proposal as

‘…an important and welcome idea that must be supported by all right-thinking South Africans with even a smidgen of a conscience or common sense… Why not impose such a tax of — say — 2% or 3% of one’s annual income for a period of a year or two and then divert that tax into a special fund, administered by a respected panel of experts with the brief of funding and administering projects that would begin to address the shockingly bad facilities at many government schools frequented by the poorest of our citizens — a state of affairs indisputably caused by apartheid.’ (full article)

Issues of apartheid reparations, redress, economic transformation and poverty eradication all lie at the heart of this conversation.

Irrespective of your position on Tutu’s proposed wealth tax, few among us can disagree with his assessment that South Africa continues to be ‘a society of fantastic wines and restaurants and expensive tastes in automobiles, wrist watches and real estate‘ for some, while millions of others continue to live in poverty. The South African Child Gauge 2010/2011 reports that as of 2009, 60.5% of South African children (about 11,252,000) lived in poverty, in households with a monthly per capita income of less than R552.

Meanwhile, according to Statistics South Africa’s 2005/06 Income and Expenditure Survey, at that time the most affluent 10% of the population had a shared income of R381 billion, compared to R1.1 billion among the least affluent.

Following the conclusion of the TRC, a President’s Fund was established under the Promotion of National Unity and Reconciliation Act (Act No 34 of 1995), which is intended to provide support for survivors of apartheid gross human rights violations and for community rehabilitation. This Fund had accumulated close to one billion rand by March 2010. (President’s Fund Annual Report)

While the reparations through the President’s Fund are important and should be considered carefully, is it worth thinking about how much more could be achieved with an additional 1% tax on the income of our wealthiest 10%?

What are your views on Tutu’s proposed wealth tax, prospects for reparations, and creative solutions to economic transformation and poverty eradication?