The ANC says that a wealth tax is the preferred option to fund a basic income grant in South Africa. This was one of the key discussions at the party’s policy conference this weekend.

Chair of the ANC’s economic transformation subcommittee, Mmamoloko Kubayi told the Sunday Times that such a tax should ideally target the top 5% of high net worth individuals and estates with significant assets.

“The majority of the wealth of this country is in the hands of 5% of the population. That’s not right. We’ll have to have SARS look into (a wealth tax),” she said.

Talk of a wealth tax to fund a basic income grant in South Africa shows the party is moving closer to adopting a basic income grant as a fundamental policy going forward – a policy many economists and analysts have held as a given.

Ahead of the conference, the ANC’s subcommittee on social transformation proposed that the country formally introduce a basic income grant of R350 – the price-point used over the last two years for the social distress relief grand (SDR) doled out to assist those with no income during the Covid pandemic.

Beyond Covid-19, the subcommittee said the grant can be extended and expanded as a basic income grant to address socio-economic inequalities across the country that affect the most vulnerable in society.

According to analysts, the question of the basic income grant was never if, but when – with the real concern being how it will be funded.

A new research report published by Intellidex in partnership with South African business groups outlined the cost and funding complications of a basic income grant in South Africa.

The group warned that if a basic income grant was introduced at an unaffordable level it could lead to further strain on the economy and cause knock-on effects that cause harm to all – including the people such a grant purports to aid.

At R350 a month, the cost of the grant would range from R27 billion if offered to original SRD recipients to R252 billion if offered to everyone in the country (universal grant).

With the ANC’s proposal, the cost would fall around R73 billion, according to 2021 estimations.

Long term plan

Whether for a new grant or to bolster the state’s coffers, a wealth tax has been on the table for several years, with National Treasury announcing in 2021 that the revenue service would bolster its data collection on the country’s richest.

In 2021, SARS has boosted its collection capabilities, specifically targeting the country’s wealthiest with a specialist high-net-worth team.

While SARS insists the team is there to assist with more complex tax needs, financial experts have warned that this renewed focus on wealthy individuals in the country is priming taxpayers for the introduction of a wealth tax.

Intellidex warned that placing a greater burden on those with the means to escape it could backfire.

“Some taxpayers may withdraw from the tax system altogether by relocating to jurisdictions where taxes are lower and/or where they feel they may receive a better return on the taxes they pay,” Intellidex said.

“Emigration is a potentially serious threat to the medium- and long-run stability of the tax system.”

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