A 2% wealth tax proposal was one of the highlights of Brazil's presidency of the G20, which preceded the passing of the baton to South Africa. The jury is out on whether the tax is implementable as some countries, such as the US, are not on board despite being part of the group, which represents between 70% and 85% of global output. The tax could impact about 3,000 dollar billionaires across the world.
The tax would raise an extra $250bn (R4.5-trillion) per year, which could be used to address issues such as climate change or global poverty. The apparent snag is its feasibility. Unimplementable decisions — as good as they sound — risk turning the G20 into just a talkshop instead of a body that pulls together the most consequential presidents and their governments. A G20 unifying agenda is impossible due to fragmentation, insular countries and their interests.
South Africa's presidency gives it a chance to intensify the work already done under Brazil's stewardship, emphasising the need for global inclusivity and impactful fights against poverty. South African technocrats will have to walk on eggshells as they seek to drive a programme in a fragmented environment and rising insular politics.
Gabriel Zucman, an economist at the Paris School of Economics and the University of California, Berkeley, suggested the idea of a global wealth tax. His argument of “overwhelming evidence” that the super-rich have very low effective tax rates and pay much less tax than middle-class people throughout the world enjoyed the support of countries like France, Spain and South Africa.
Finance minister Enoch Godongwana said this week that South Africa intended to use the presidency to advance an African agenda. For example, the G20 Africa expert panel will be composed of leading African economic, development and finance experts from the public sector, think-tanks, academia and international financial institutions.
There is an opportunity to ensure various African initiatives, including the “compact with Africa”, can be strengthened to the benefit of the continent, he said.
While South Africa does not lack the technocratic skills to preside over this body, it will still be hard to score implementable Africa-specific programmes. The biggest world economies dominate the G20, and being chair does not automatically raise a host country's hold on the lever in a way that can drive selfish interests. South Africa's benefits are related to trade and investment attraction and country marketing.
Some of Africa's policy interests, including free trade on the continent, rest within its ambit and do not depend on global multilateral forums. Issues like Africa's debt and macroeconomic instability, access to global finance, and climate change policy discrimination are among the global levers Africa can push at the G20.
A little irony is that South Africa has struggled to embrace the idea of a wealth tax at home
It helps South Africa's position that the AU, like the EU, is a member of the G20. A little irony is that South Africa has struggled to embrace the idea of a wealth tax at home, something that people like the late Desmond Tutu propagated ages ago. Tutu's version was a one-off tax as part of a broader plan to fight inequality. This is separate from the South African Revenue Service High Wealth Individual Unit's initiative to target people with more than R50m in assets. Academics from Wits University have suggested a 3% tax on wealth above R3.6m and higher rates for higher amounts. The rate could be as high as 5% for wealth over R27m and 7% for wealth above R119m.
This could cause capital flight, with billionaires running to havens that would not enforce a wealth tax. South Africa already has a thin tax base, making the wealth tax idea a bit prickly. Tax morality is a complex topic when a government like ours is still hell-bent on supporting tax guzzlers like the Post Office and other state-owned companies.
A new Post Office revival strategy could cost around R30m, a little birdy has whispered. That's a nice fee if you are a consultant involved in such a project. Playing around with the public wallet easily embeds a moral hazard, or recklessness, where people spend knowing the taxpayer will pay.
• Mkokeli is lead partner at public affairs consultancy Mkokeli Advisory.
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