SARS Commissioner Edward Kieswetter has highlighted the complexities surrounding the proposed wealth tax, emphasising that this tax is not an instantaneous solution to the nation’s pressing fiscal challenges.
Kieswetter underscored the need for extensive work to lay the groundwork for the initiative.
“This is one of the areas where you may need to come back and do a deep dive discussion with members on wealth tax because the first question is, what is a wealth tax? How do we define a tax on the wealthy?” he said.
He made the statement during the joint meeting of Parliament’s committees that deal with matters of finance and appropriation on Friday.
The meeting was aimed to engage Finance Minister Enoch Godongwana and the National Treasury on the 2025/26 Budget tabled earlier this week.
Godongwana’s Budget proposals for 2025/26 include a controversial increase of VAT by 1% over two years.
This move has drawn strong opposition, with critics advocating instead for a wealth tax as an alternative means of generating revenue while enabling the South African Revenue Service (SARS) to better tackle illicit financial flows and tax evasion.
Kieswetter said there was no common definition of wealth tax.
“Once we have a common definition, then we must identify and find those whom we think this wealth tax would be applicable to. Then we have to define the wealthy and then the wealth tax. And then lastly, we have to build the capacity to administer this because if we don’t, inadvertently you will have a worse outcome if you can’t administer the policies or the measures that we take.”
He also said pursuing wealth tax required a deep amount of work.
“It certainly will not bring instant money for the government to do so, but we are not without a wealth tax.”
Kieswetter told the MPs that 48% of the R8 billion income from tax came from people who earn over R1 million.
“So we would say, maybe they begin to speak to the wealthy. Almost half of our taxes come from only 570 individuals.”
He stated that the tax on wealthy people represented 7.2% of individuals who were taxed, and 3.9% of the individuals were employed.
“We have other forms of wealth taxes, including estate duties. When people die, it (the system) is biased towards collecting money from the wealthy. Donations tax, equity transfers when people trade in shares, transfer duty, capital gains tax, and property taxes in provinces, in local governments, are all forms of wealth tax.”
However, Kieswetter said the talk on wealth tax was not starting off on a blank page as SARS has since 2021 created a provision that looked at all individuals who own more than 50 million of assets.
“That revealed to us that there were about 2 800 individuals who would fit that category, and we have also discovered that among those individuals, 460 million of assets are registered as local assets, and about another 150 billion assets are offshore assets.
“We know that because of the automatic exchange of information that we get from over 100 countries, and that the tax on their income is about R7 billion.”
Meanwhile, Kieswetter thanked Godongwana for the R7.5 billion allocation made to the taxman to build its capacity to collect more taxes as well as parties that called and supported their call for additional funding.
Explaining the R800 billion in uncollected taxes and why SARS asked for additional funding, Kieswetter said the amount came from studies by Davis Tax Commission and scholarly work that confirmed their conclusions.
“We have seen quite a significant improvement in percentage points, at least 65 to 66% points.”
He gave the breakdown of where the monies were uncollected from excise duties to illicit trade flows, VAT, outstanding returns, and debt that was undisputed.
“Even if we are 30% successful, we will still collect over R200 billion if we applied ourselves there, and I think that is where we have made the appeal for additional funding.”
Kieswetter also said R2 billion of the funding the National Treasury allocated for 2025 will be focused not on closing the tax gap but on a massive debt recovery programme.
“We will double the efforts and spend R2 billion towards the reduction of stock that holds contingent liability for the state,” he said, adding that the R500 million will be used to modernise systems as they could not pursue areas of abuse without deep investment in technology systems.
SARS plans to use the funds in the deployment of artificial intelligence, the automation of the team work, building and increasing risk detection.
“We know that there are at least 30 000 individuals who have economic activity of greater than a billion rand, who are not registered for tax.
“We know from this work that there are 1 000 taxpayers that have previously been marked not required to file, who in the meantime increase their economic activity, and so they should file, but they are not.”
