Implications of wealth tax

2011-08-23 15:01

Let us examine the implications of a wealth tax. Let us first define what wealth means. The one definition of wealth that I like is the people who pay the salary of rich people. In the context of a wealth tax I am going to assume that the term is more liberal and includes salary earners as well as business owners and farmers, basically anybody with a turnover of X per year in taxable income.

Let us look at three taxable starting points, R290 001 and R525 001 and R1m. This represents lower to upper middle class salary points. The individual on R290 001 will pay R67 260 income tax, the individual on R525 001 will pay R152 960 and the individual on R1m will pay R342 959. First think to note that the jump in salary from the first to the second bracket is an 81% increase in income and a 127% increase in income tax. The second jump is an increase of 124% tax on a 90% Salary increase. From this it is clear that the “wealthy” already pay wealth tax by way of a bigger tax percentage on their earnings.

That leads me to the second effect of the new proposed taxes. Salary earners have a fixed income with which to cover expenses and luxuries. Expense will be anything from a bond or rent to utilities bill and groceries where the luxuries will include things like takeaways, restaurant s domestic workers, gardeners and away holidays. With an increased burden the first things to go will be luxuries from the more expensive to the least expensive, domestic workers, gardeners, away holidays etc.

That leads me to the third effect of the proposed tax. It will be taking from the previously disadvantaged and giving it to whom exactly? Some people may be able to keep these luxuries others won’t and the people who will get punished most out of this are the very people that they supposedly want to introduce the tax for.

Aside from the easily measurable contribution of salary earners the real rich and wealthy contribute in a much larger scale. Most if not all of them will have businesses that employs people. Every time they buy an expensive car they pay wealth tax, every time they drive it around they pay wealth tax, almost everything they do in luxuries contributes huge sums of cash in wealth tax. Depending on how important their lifestyle is a reshuffle in their financial affairs can have an impact on a lot more people than with salary earners.

Ultimately the net result is that most if not all additional tax will lead to taking money away from something expendable in the life of the taxed in order to apply it somewhere else. These people’s income won’t magically increase with the increased burden. Increase the burden enough and you will slowly destroy the taxed to the point where the income tax base will collapse.

I know some will rejoice in the destruction of the middle class, the rich and wealthy. This celebration will be short lived however when they realise that this will also be the death of free RDP houses, free electricity, free water, free healthcare, social grants, government pension and any other free service the government currently provides.

In closing, consider very carefully the possible impact of a white tax(how sensible is it to try and support 40 million on the contribution of two million), a wealth tax and a general increate in burden on the taxpayer. The taxpayer is a very important part of our economy and without “those who benefited from apartheid” those who currently benefit from current policies (also benefitting from apartheid) won’t have anything to benefit from.

I would suggest that those who want something better in life learn from those that have something better in life how they got that something. It is not as simple as apartheid gave it to them, cut through that and see what they did with what they had to get where they are now, adopt it, improve it and prosper from it as well.

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  • Tshepo-With-An-O - 2011-08-23 15:13

    Lower income earners on R290 000??? dam...... thats like R20 000 per month.... not many blacks get that i can assure you..... No i think anyone earning R290 000 and above are wealthy for sure and must open their pockets wide so we can tax them.... And dam if you earning R500 000 then you can get taxed even more.... Dam thats a lot of money, you lot have no excuse if you earning R20 000 per month or more!!!

      Kevipedia - 2011-08-23 15:17

      You do realise that China, who happens to be the world's biggest superpower, has a MUCH lower minimum wage than South Africa does. Just because a country has a high GDP doesn't mean that everyone can be wealthy. You are bordering on Marxist ideas here and these have been proven ineffective time and time again. And what about wealthy black people who have worked hard to get where they are - do you want to tax them too?

      Tokkel Loshi - 2011-08-23 15:24

      Eish I am yet to see someone with less brains than you , Hope to meet juliass soon !

      OB1 - 2011-08-23 15:30

      thats already happening chop-o, did you not read the opening 2 paragraphs. no wonder you aren't getting 20k p/m. and just how much do you expect for low skilled labour. If you want to earn, you need to study and get qualified and assume responsibility, fool.

      zackie - 2011-08-23 15:31

      your beloved anc minsters earn 5 to 10x that for doing nothing except, coming up new ways to drain the taxpayer and economy

      OB1 - 2011-08-23 15:32

      how much is your buddy juju earning (and all his government pals, and all the BEE leeches)?

      Thor - 2011-08-23 15:35

      Tshepo-with-an-a(pe) how about.... no... how about you dont get anything... hahahahaha

      SimonP - 2011-08-23 15:40

      Tshepo, you have repeatedly stated you are a very high earner yet you now say R20000 a month is a lot of money. You have exposed yourself once again as a fraud.

      Anonymus - 2011-08-23 15:48

      well the first thing to go should wealth tax be implemented is my domestic worker!! Tshepo, i hope you have a job lined up for my domestic worker and you can explain to her why i had to let her go.

      Tolerant - 2011-08-23 15:48

      Tutu and Malema have something in common. They don't make economic sense.

      Neil - 2011-08-23 16:03

      @Tshepo: This coming from you, the self proclaimed millionaire having a little fit over 20k? LOL

      JudithNkwe - 2011-08-23 16:44

      Tshepo - most months I earn less than some of my employees. In fact I am lucky to earn R80 000 a year. Last year I earned R52000 and paid the R2000 back to SARS! This is a typical situation for an small business owner in SA. On top of this we work long hours including weekends, pay for our own jalopies and also create (in my case)5 jobs that would not be there.

      Neil - 2011-08-23 17:11

      @Tshepo: Wealth Tax is just another ANC failure, just like BEE/AA, because we just found a way around that, just like a lot of us has already found a way around the entire tax debacle. So your clever little idea wont work on me. As for attacking me personally because you lack the IQ to take me on regarding facts. Me not wearing a shirt is for 2 reasons. I am on the beach in Sanata Maria, a place you will never see in your life because you wait for hand outs and don't want to work.Btw, did not know you swim in a T-Shirt? Are you silly little boy? 2nd reason is showing my support for "slut walk" against clowns like you saying women dressing they way they do provoke rape. So as for me removing my picture, no. Btw, you are the last one that can comment on looks FISH-FACE..

      Markal - 2011-08-23 17:14

      O tshepo you old white troll, you do like the attention don't you.

      Neil - 2011-08-23 17:16

      @Tshepo: As for your question what I am eating.. Yes perhaps more junk food then I should. Still better then pap & runaways though.

      Peg-Leg-Sven - 2011-08-23 22:05

      @tshepo, if you read the article properly, you would have discovered that the R20,000/month is not the lowest paid earner, but the lowest paid of the so called middle class. The ones that pay the most taxes as the very poor do not pay tax at all and the super rich use every trick in the tax code to avoid paying high taxes.

      Kobus - 2011-08-24 01:29

      Tshepo is a white guy takin the mickey out you bunch of @-holes!

  • Kevipedia - 2011-08-23 15:14

    Unfortunately an article like this requires a certain level of ambition and drive in order to 'hit home'. The majority of our population are quite happy to sit on their backsides and receive whatever the government gives them. It appears apartheid not only removed their human rights, but the will to work and improve their lives too. But hey... we benefited! The sooner the majority of South Africa realise that life simply isn't fair and it takes getting off your backside in order to bring about change the sooner we can get on with stuff that really matters.

      Gerhard - 2011-08-23 15:20

      Well said Kev!!!

      PomegranatePip - 2011-08-23 15:27

      I wonder how many black South African's would choose not work given the chance. Loss of hope is a pretty big deal. It's easy to have ambition when you come from a privaleged background. It's a whole heap more difficult when you have massive hurdles to overcome.

      Thor - 2011-08-23 15:36

      All they had left was the will to breed and damm did they do that well

      OB1 - 2011-08-23 15:37

      While poor blacks have many hurdles to overcome, they also have many advantages that whites don't have (AA, BEE, lower pass and entrance requirements to education, etc.), but those opportunities need to be taken, and require hard work and commitment, but the majority just want it handed to them on a silver platter.

      Stevie - 2011-08-23 15:39

      Agreed. "The real tragedy of the poor is the poverty of their aspirations." ~ Adam Smith

      Greegs - 2011-08-23 15:55

      Well said. I'd like to know who will pay me for the 2 years I did in the army and 5 camps....? Who can I invoice?

      Goose - 2011-08-23 15:59

      @PomegranatePip It's actually quite easy to get ahead. You simply start by going to school and passing matric, then like the rest of the people, you do a waiter job and pass for further studies. Then when you have your first job, you gain experience and apply for a better job. Repeat the process and voila, success!!!!! Unfortunately it requires something called work and commitment!

      Greegs - 2011-08-23 16:15

      And surely I qualify for a army veteran payout?

      M - 2011-08-23 16:16

      2Pomegrantpip - from the looks of how many workers go on strike at the drop of a hat, quite a few would choose not to work.

  • Pictureof - 2011-08-23 15:17

    If its a choice between my Herleys repayment or the Maids Salary, the maids will have to break some really bad news to their kids.

      Thor - 2011-08-23 15:37

      True that... true that... would happily do my own gardening

      Lacri - 2011-08-24 10:24

      You see, this just sounds spiteful and petty, especially because you're threatening children. Not constructive at all.

  • SolomonMagalefa - 2011-08-23 15:18

    Good points there @Tanrack. The better way to go would be to apply "Super Tax" on luxury goods and other non-essentials. I would also give some form of tax breaks for individuals who employ domestic servants, gardeners, etc.

      OB1 - 2011-08-23 15:38

      now that makes much more sense. thanks for that comment.

      Greegs - 2011-08-23 15:44

      Spoken like an economist! Agree 100%

      Greegs - 2011-08-23 15:45

      Let's include education as well. I'd way rather pay for a child's education than pay over to government!

      Lacri - 2011-08-23 15:57

      That's a really interesting idea. Allowing the salary of domestic workers to be claimed as a deduction (obviously within reason and subject to upper limits) would help to increase employment in this sector.

  • Schalk - 2011-08-23 15:18

    Nice summary. I too have written articles stating the ills of wealth redistribution. This has been proven time and time again throughout history. It simply cannot work. You cannot create wealth by dividing it.

      Schalk - 2011-08-23 15:27

      Another point which might be quite unpopular (please correct me if it is factually flawed) is this: As I understand, the good "legacy of apartheid", the fact that SA was built up to one of the stronger world economies, is perhaps the only reason why the ANC have not yet succeeded to turn SA into another failed African state. Liberation movements in Africa seem to mostly end in economic and social problems. SA just had a nice head start in the form of a sizable body of taxpayers that can absorb wave after wave of government incompetence and immorality. Unfortunately though, this is just delaying the repetition of history. If this country is to survive, we need to get the "liberators" out of government ASAP. The good "legacy of apartheid" has given us this chance, but the window of opportunity is closing...

      Mr. Fusion - 2011-08-23 16:45

      deja vu - you keep a library of your previous posts? not that I'm complaining

  • Smindlo - 2011-08-23 15:20

    who does not want to pay and whats their reason? any person earning more than R1M must be taxed 60%, finish and klaar.

      Doublepost - 2011-08-23 15:32

      If you only get 40 % of what you earn and have to pay for everything else, why work?

      Tolerant - 2011-08-23 15:41

      Our "friend" Malema also did not want to pay tax (it has been alleged) , this is another reason why he is in hot water. We must be carefull in not chasing big earners away. 60% is a bit much.

      Albo - 2011-08-23 15:41

      @Smindlo - so what you`re saying is then the harder one works, the more you should get taxed??? You do understand that `white` peoples salaries don`t just fall from the magical money tree right?

      Stevie - 2011-08-23 15:42

      Please explain how you arrived at the figure of 60% and why.

      Goose - 2011-08-23 16:02

      Please remember to switch your brain on BEFORE commenting! You have a terminal case of foot-in-mouth disease. Just read what you have written and then hopefully the penny will drop.

      M - 2011-08-23 16:03

      Smindlo then please remind me why my husband and I should stay in South Africa. Please give me one good reason why my husband should not take his rare I.T. skills and share them with say the U.K. or the U.S.

      Neil - 2011-08-23 16:04

      @Smindlo: You are an idiot. FINISH and KLAAR!

      Smindlo - 2011-08-23 16:10

      how did I get to the 60%? do you want to pay 100% for colonial tax? fine, pay all your salaries towards the apartheid fund then!!! you shall be notified very soon...hehehehehehehe

      Smindlo - 2011-08-23 16:12

      @M, thats nothing meisies, we will train the masses and they shall be able also have the IT skills you claim to have!!!!!!!!!

      Jvandm - 2011-08-23 16:12

      Any person who earns more than R1M a year probably has some sort of scarce skill and is also probably responsible for employing a good few number of people. This type of person is very attractive to first world countries, and taxing them 60% will make them leave for a place where they do not have to pay so much tax. The country will then lose their tax money, the skill AND many jobs will also be lost.

      Tokkel Loshi - 2011-08-23 16:22

      The whole anc cabinet , but Oh no they dont pay tax !

      Mr. Fusion - 2011-08-23 16:56

      @smildlo - who will train them? The teachers and IT professionals which have left already? - idiot

      Krusty_Crab - 2011-08-23 17:12

      @Smindlo... WHY ??

  • Wacko - 2011-08-23 15:20

    Well first to go is my gardener , cleaner with whatever comes first ...NHI or wealth tax ......tata bye bye.....

      M - 2011-08-23 16:13


  • Dougalan - 2011-08-23 15:33

    Tshepo - you don't have much idea, do you? R20 000 a month makes you wealthy??? Maybe if you are Black and get housing, water, electricity etc for free. However if you are White, you've got an average of R6000 a month for decent medical aid for 2(including self-payment gaps and co-payments). Then R4000 per month for a bond on a medium unit in a complex, around R4000 a month in tax, R3000 per month on an average car, R1000 in electricity - so we are now up to R18 000, and we haven't even taken food, cellphones, clothing, insurances and petrol (another R1500 per month) into the calculation. Wealthy? Dream on man.... And before you say why don't my wife and I go to a public hospital? Answer: a) I don't want to die soon and b) Maybe when ANC ministers use public healthcare, I will too. But wealthy? You just have no idea whatsoever man, that's obvious.

  • Greegs - 2011-08-23 15:43

    I paid my wealth tax when I had to do 2 years army!

      darkwing - 2011-08-23 19:02

      Now you are beginning to sound sorry for yourself.

  • PAR - 2011-08-23 15:44

    Firstly, I am sure that the very rich make sure their money never gets to this country so as always it is the middle class who continue to go backwards as they try and carry the load. Secondly, every senior government employee earns more than the middle class and they are all black so I vote they be the ones that pay wealth tax.

      edalsg - 2011-08-23 16:09

      This is the most accurate of all the comments made . My money is gone and is going offshore . I dont care abt the Interest rate , rather the Bank have it than the ANC. Next "grab" of whatever sort --my maid will join the unemployed , then the Gardener -----With the ANC,s blessing.

  • Cecil - 2011-08-23 15:54

    What about taxing no-contrabutting/consuming tribes, as in those who have never contributed in terms of inovation and inventions for the benefit of this planet.Basical,those who always consume, the predators,the whiners.

  • MP3 - 2011-08-23 16:20

    This topic doesn't even deserve the attention that the media gives it. I guess it's a slow news day/week...

  • The_Lil_Wizard - 2011-08-23 16:24

    SARS needs people earning those R1m salaries! Think about it, the minimum tax is 18% (for those of you who don't know or don't bother to pay) on every Rand you earn, now if you have 10 people earning R100k per year, paying 18% tax, SARS only collects R180k off those 10 people. Now you have 1 individual earning R1m per year, and due to the PAYE system, he pays R342k tax per year. Who do you think SARS is going to like more? The reality is of those 10 people earning R100k per year only half will actually pay tax (due to minimums for tax submissions and people earning cash and not declaring it), while the guy earning R1m is going to find it pretty hard to dodge old SARS!

      Margaret2 - 2011-08-23 18:18

      You don't pay tax on the first R59,750 per year.

      The_Lil_Wizard - 2011-08-24 16:18

      Yes Margaret, technically you don't pay tax of the first R59,750, but that is due to the primary rebate that everyone is entitled when submitting your tax return of R10,755, i.e. R59750 x 18%

      Margaret2 - 2011-08-24 19:50

      Salary earners (probably, most of us) get the benefit on a monthly basis. They don't pay it, and then get it back on submission of their tax returns.

  • germanski - 2011-08-23 16:59

    Tshepo , the problem is not a lack of money.This government has huge amounts available.The problem is the correct spending of these allocated budgets.Are you aware that many provinces underspend on their budgets.

  • aiazmir - 2011-08-23 18:59

    The solution of course is to nationalize the Reserve Bank and for them to not charge the government any interest on the government's debt. Therefore banks will not have to charge any interest, because the government will not pay any interest on "Debt" that they no longer have. Money supply will be determined by the needs of people have a need for medium of exchange. The government will determine what this is. Tax will be determined by those who are no longer in debt to the Reserve Bank, and therefore tax rates will be lower. Simple hey? Who are we really paying tax to?

  • SNOTKOP - 2011-08-23 20:18

    Here is a breakdown of my budget (middel class white family, both myself & my wife with above average qualifications (B-tech) R22000 income (Myself - Take home pay after tax, medical & pension) R9000 income (Wife - Take home pay after tax, medical & pension) Total Income = R31000 Now deduct expenses: R8000 bond payment incl Life insurance, building insurance (R690 k bond) R7000 two Car payments (R100000 + R230000 car) R3500 incl meat R500/week milk/bread & other shortfalls in groceries. R1500 month for Domestic worker (3 days per week, from 8am to 1pm) R500 per month Domestic worker meals & transport) R1400 per month school fees (2 kids excl sport or other costs) R700 Car & household insurance R200 Security company R1800 Petrol to work & back (2 cars) R600 Cellphone costs (2 phones) R500 per month, car maintenance kitty (2 cars. licenses, tyres, services) R500 per month clothing (for a family of 4, incl school uniforms) R2000 per month pre-paid electricity R850 per month property rates & taxes, incl refuse removal & extra sewer. Total Expenses = R29550 per month R1450 per month left over for unforseen things, going out or relaxation. As you can see we just get by. I`d say that most white working middel class people are one pay check away from joining the masses in the locations.

  • SNOTKOP - 2011-08-23 20:25

    As you readers can see from my budget, the first thing go as a result of tolls, NHI or wealth tax, will be luxuries like the domestic worker, security company, and insurances.

  • umhlopo - 2011-08-23 20:52

    tshepo you must do something about your eyes,buy looking in two directions at the same time your career of stealing hubcaps off moving cars will be short lived

  • Freddy van der Merwe - 2011-08-23 22:01

    when does aids start working ,come on aids do your work

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