Commentators predict that the wealth tax could take the form of a 0.5% annual tax on all assets with a net asset value over ZAR30m (£1.7m).
If it goes ahead, it’s likely it will be announced in the 2017 budget in February.
The Davis Tax Committee (DTC), which reviews and makes recommendations on South Africa’s tax system, is in the early stages of its wealth tax review and is expected to release its findings by the first quarter of 2017, according to a report in South African business publication Moneyweb.
Judge Dennis Davis, who heads up the DTC, told the website that committee was currently looking at potentially introducing an annual tax on wealth, re-examining a land tax or reinforcing the Estate Duty Act.
Estate duty
Currently, the estate duty applies to estates with a net value in excess of ZAR3.5m (£205,538, $251,159, €230,831), including all worldwide assets, are subject to a 20% levy.
However, Davis believes even if it is introduced the wealth tax is not expected to add more than ZAR5bn to state coffers.
“In the South African context I would be extremely surprised if a wealth tax brought in more than ZAR5bn a year,” he told Moneyweb.
He added that often the tax revenue collected is eaten away by the administrative cost and complexities of setting up it up, citing that wealth taxes around the world “do not produce huge sums of money”.
It comes as South Africa’s rampant income inequality, one of the highest in the world, was demonstrated earlier this month when research from the country’s Stellenbosch University found that just 10% of the population own up to 95% of all assets in South Africa.
Political fallout
Africa’s most industrialised economy is also facing a perfect storm of low commodity prices, sluggish global demand and the worst drought in more than a century.
Policy uncertainty and political turmoil has plagued finance minister Pravin Gordhan who will face fraud charges on 2 November as part of his long-running battle with disgraced president Jacob Zuma.
The pair have repeatedly fallen out over the affordability of nuclear power plants the president wants to build, Zuma grappling to take control of the management of state companies and the national tax agency.
The feud has pushed business confidence to a three-decade low as the nation risks losing its investment grade credit rating, with S&P and Fitch both threatening to downgrade South Africa’s bonds to junk status unless the government can stabilise government debt.
Portugal’s property tax
Earlier this month, Portugal’s government announced that it will introduce an annual property tax of 0.3% on homes valued at over €600,000 (£538,572, $660,108).
The new levy, which if approved by parliment will come into force in 1 January, is likely to replace a more punitive stamp tax system which applied a 1% charge on homes valued above €1m.
