‘Rich tax’ and ‘graduate tax’ cause a stir
Business / 09 Feb '13, 3:58pm
Johannesburg - While the announcement of a hike in sin taxes is almost a given in Finance Minister Pravin Gordhan’s Budget speech later this month, a mooted tax on university graduates and an increase in the “rich tax” has caused a stir.
The ANC’s Mangaung conference suggested five areas of future taxation, including “progressive and redistributive taxation” through which the ANC could ensure “bold forms of state intervention”, according to resolutions.
Finance Minister Pravin Gordhan. Credit: INDEPENDENT NEWSPAPERS
Friday saw speculation that the so-called “rich tax” could rise from 40 percent to 42 percent for those earning more than R617 000 a year and to 45 percent for those earning in excess of R1.5 million.
Some economists were reported to have said this was likely, but possibly not in this year’s budget.
Such a move would be in line with a global call for the rich to pay more taxes.
Treasury spokesman Jabulani Sikhakhane would not comment on speculation, saying changes to tax policy were announced by the Minister of Finance when he tables the national Budget.
Deborah Tickle, director of international and corporate tax at KPMG, said while such hikes were possible, “the problem with this option is that there are so few people in this country who earn at this level that such a move is unlikely to solve the minister’s budget problems.”
The Mangaung conference also resolved that “consideration must be given to a graduate tax for all graduates from higher education institutions”.
The notion was slammed this week by organisations, although the ANC sent out a statement yesterday indicating that “this was not a firm recommendation; save to say that the commission agreed that this recommendation needs to be considered in future. To this extent, no consideration has been made by the subcommittee or the ANC on this recommendation”.
The South African Student Congress (Sasco) said such a tax would ensure that the poor never broke the cycle of poverty.
“Graduates from working-class and poor backgrounds have a historic burden to redress the plight of their families while paying pay as you earn (tax) and making their repayment to the National Student Financial Aid Scheme of South Africa (NSFASA). Now they will also be expected to contribute to a graduate tax,” Sasco said.
The UK and Ireland proposed similar taxes a few years ago, but were criticised because it was thought they would provide an incentive for people to leave the country after graduating.
Earlier research into student loans offered by the NSFASA indicated that they took, on average, 10 years to repay.
Increased taxes were also on the minds of mining industry chiefs who attended this week’s Mining Indaba in Cape Town.
The Mangaung resolution says: “The state must capture an equitable share of mineral resource rents through the tax system and deploy them in the interests of long-term economic growth, development and transformation.”
But at the indaba, Mining Minister Susan Shabangu was careful to allay fears of massive tax increases, referring to a “competitive tax regime” which would help South African companies compete with global ones, while Minister in the Presidency Trevor Manuel promised there would be “no surprise new taxes”.
Also not in the immediate offing is a local business tax for municipalities, first suggested by the South African Local Government Association which in 2011 called for a tax on local businesses.
Another possible tax mentioned at Mangaung was “Taxation of under-utilised land, in both communal and commercial areas”, seen as a way to increase rural development and land reform.
While these are the taxes currently mentioned in the ANC’s policy, Gordhan surprised some during his Budget speech last year by increasing capital gains and dividends taxes.
He has also previously indicated that taxes, either through VAT, as a surcharge on the taxable incomes of individuals or as a payroll tax on employers, will need to fund the National Health Insurance which will require a multi-billion rand budget from 2014.