Gambling and wealth taxes won’t solve budget crisis in South Africa, says tax expert Dennis Davis
Retired judge and Treasury predecessor pours cold water on ‘quick-fix’ tax proposals as Treasury scrambles for tax alternatives in South Africa.
South Africa – The Treasury’s sudden about-turn on the proposed VAT hike has left a gaping hole in its budget plans, and political parties are clamouring to plug it with fresh tax ideas. But retired judge and tax expert Dennis Davis has thrown a wet blanket over some of the more headline-grabbing proposals.
Speaking at the Cape Town Press Club, before Thursday’s official withdrawal of the VAT increase, Davis made it clear that neither a wealth tax nor an online gambling levy is the silver bullet the fiscus needs. He highlighted the messy complexities behind a concept that sounds simple on the surface.
He pointed out that taxing online gambling would be a logistical nightmare, especially since many operators are based in offshore jurisdictions and tax havens. And on the wealth tax: “You have to have an asset base to have a wealth tax, otherwise what’s the basis of the tax going to be? Are you taxing credit, are you taxing land, what is it that you tax?” Davis questioned, according to EyeWitness News.
Davis, who led the Treasury’s Tax Review Committee from 2013 to 2018, cautioned that slapping a tax rate equal to the return on assets could be seen as confiscatory, potentially landing the government in hot constitutional water.
“If you are going to have a low rate, depending on the assets that you choose, what return are you going to get?” he added.
Mounting pressure to find new revenue streams
The political pressure is mounting on the Treasury to find new revenue streams after the VAT U-turn, with opposition parties calling for alternatives that include taxing the ultra-rich and the booming online betting industry.
But Davis isn’t sold. With Finance Minister Enoch Godongwana expected to withdraw two crucial money bills that allocate funds to departments and provinces, the search for realistic revenue solutions has taken on new urgency.
The problem? None of the flashy fixes being floated seems likely to hold water or raise enough funds.
As South Africa stares down another budget shortfall, it seems the road to fiscal redemption won’t be paved with poker chips or property portfolios.
