The looming threat of an additional ‘wealth tax’ in South Africa to fund a universal basic income grant will further erode the country’s tax base, as wealthy South Africans move to emigrate or offshore their assets to avoid higher taxes, says Dani van Vuuren, Business Development Consultant at Sovereign Trust.
In the process, the country faces the prospect of an accelerated ‘brain drain’, as skilled and entrepreneurial South Africans look to establish themselves in countries that are more politically and economically stable, while offering a more predictable tax regime.
Over and above the immediate implications, a wealth tax is also not a sustainable solution. Speaking at the SA Institute of Taxation’s Tax Indaba, National Treasury acting director-general Ismail Momoniat said a wealth tax was simply not enough to achieve its suggested goals, and implementing it would have wide-reaching consequences.
The most popular destinations for emigration remain Australia, New Zealand, the US and Canada, especially for skilled persons, but there is a growing interest in countries that offer residency by investment options. Mauritius has made it cheaper and easier for investors and expatriates to live and work. The island recently reduced the minimum investment required to acquire an occupation permit as an investor, and live in Mauritius as a non-citizen, to $50,000 , from $100,000 .
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