Cosatu proposes wealth tax on earnings above R1m

The Congress of South African Trade Unions (Cosatu) and its allies in the People’s Budget Coalition have proposed to Parliament that a wealth tax should be imposed on the rich in order to improve the flow of revenue to the government, and also to reduce the growing inequality between the rich and the poor.

Prakashnee Govender, the head of Cosatu’s parliamentary office, told a joint meeting of the finance and appropriations committees of both houses of Parliament on Friday that the tax should be imposed on people earning more than R1-million a year.

Govender said that the stagnation of wages and the meteoric rise of executive management salaries have caused gross income inequalities that must be addressed by a review of tax thresholds.

She also suggested further zero-rating for VAT of food items and other things to assist low-income shoppers, such as children’s clothes and books and other educational materials.

“We believe that the list [of zero-rated food stuffs] is too narrow and too basic,” she said, “and we need to review it.”

She suggested that the list of food items might not be zero-rated but could be subject to a lower tax rate.

By way of illustration of the need for a review, Govender singled out dried beans, which are zero-rated, while canned beans are not. The dried beans, she said, would require more cooking, which uses more electricity—that is an additional financial burden.

The Cosatu-led coalition, which includes the South African Council of Churches and the South African Non-Governmental Organisation Coalition, pointed out that the tax relief in the budget continues the trajectory that sees corporations paying relatively lower taxes than individuals.

“Estimates for corporate tax revenue for 2010/11 are R133,6-billion as opposed to R224,6-billion for individuals, further reflecting disproportionate respective increases from 2009/10 of 3% and 13%,” Govender told the committees.—I-Net Bridge