Billionaires, Taxes, and the Real Lessons for South Africa
This article will count 0.25 units (15 minutes) of unverifiable CPD. Remember to log these units under your membership profile.
A new study from UC Berkeley grabbed headlines: the 400 richest Americans pay an average effective tax rate of just 24%, lower than many well-paid professionals. The outrage is understandable. However, for South Africa, the deeper issue isn’t just how much is taxed, it’s how well those taxes are implemented, how wealth is utilised, and what type of system fosters sustainable economic growth.
What the Numbers Say
The US study (2018–2020) measured “economic income” including unrealised gains, dividends, wages, and business profits. It showed the ultra-rich have seen their effective rate drop over time.
Critiques point out that unrealised gains inflate the base, making the rate look lower. Still, the study exposes how much wealth falls outside typical tax structures.
The Wealth Tax Debate
Globally, this fuels the call for a wealth tax. Those who advocate for this approach argue that it reduces inequality, broadens the tax base, and raises revenue. The IMF, OECD, and economists like Thomas Piketty highlight examples from Norway and Switzerland.
But here’s the catch: South Africa is not Norway. With weak enforcement, high avoidance, and corruption risks, a wealth tax could prompt capital to be pushed offshore and shrink our already fragile tax base.
Even more critical: in South Africa’s context, wealth works best when it stays invested. Money left in the hands of entrepreneurs funds new businesses, jobs, and infrastructure. These investments expand the economy and, ultimately, the tax bases, something punitive taxes can’t achieve.
South Africa’s Real Problem: Efficiency, Trust, and Investment
South Africa already has one of the highest tax-to-GDP ratios among developing countries. Yet public services are in crisis, infrastructure is crumbling, municipalities are failing, and hospitals and schools are under-resourced.
Research shows tax efficiency drops sharply when citizens distrust authorities. A study by the IMF covering 32 African countries (including SA) found that low trust in tax agencies significantly reduces VAT and corporate income tax collection efficiency.
There is also solid evidence that many African tax administrations, including South Africa, are operating well below their potential. Some studies suggest they could increase performance by 3% to as much as 70+% through reforms.
Why Local Investment, Philanthropy & Private Wealth Matter
Wealth invested locally through SMEs, startups, infrastructure, and philanthropy generates jobs, economic activity, and broad-based growth. These build up the tax base, rather than eroding it.
SMEs are the backbone of job creation, and they thrive when private wealth stays onshore.
Entrepreneurs reinvesting helps absorb informal workers, raise productivity, and boost downstream industries.
Philanthropy can fill gaps in public services (education, healthcare, social programs) and inject innovation where government is slow to act.
Technology & Transparency as Game-Changers
Tracking funds using blockchain-based systems or digital oversight tools can provide better visibility into where tax revenues are allocated.
Citizen participation tools (budget tracking, participatory budgeting) increase trust and make government more accountable.
Smart contracts and AI can further reduce leakages, ensuring every rand delivers tangible outcomes.
CIBA’s Position: Growth, Jobs, and Transparency
The Chartered Institute for Business Accountants believes South Africa’s tax system must reflect African realities, not imported ideologies. Our focus is on results, not ideology:
Growth through local investment and SMEs – Wealth should stay invested in South Africa, where it can fund new businesses, support SMEs, and create jobs. This expands the economy and broadens the tax base in a sustainable manner.
Efficiency and accountability before new taxes – Citizens must see value before paying more. South Africa cannot afford new taxes until it addresses waste, corruption, and inefficiency.
Transparency through technology – Digital tools like blockchain can track every rand in real time, giving citizens oversight and restoring trust.
Agility in service delivery – CIBA is neutral on whether the state, private sector, or communities deliver services. What matters is achieving outcomes: reliable infrastructure, quality education, accessible healthcare, and stable energy.
Protecting African sovereignty – Tax policy must be designed for South Africa’s developmental stage, not imposed from abroad.
Conclusion: Fix First, Grow Through Investment
While global debates about wealth taxes raise valid concerns about fairness, South Africa’s priorities are different:
Acknowledge fairness concerns – yes, the wealthy must contribute their share.
Put efficiency and accountability first – new revenue streams mean nothing if wasted.
Encourage local investment – keeping wealth in businesses, jobs, SMEs, and infrastructure grows the economy faster than punitive taxes.
Protect African sovereignty – imported tax policies must never compromise local growth and development.
South Africa doesn’t need a wealth tax. It requires efficient government, investment-led growth, and technology-driven transparency that expands opportunities for all, turning accountants into true nation-builders.
Source Articles: Accounting Today, FANEWS
