The concept of a wealth tax is a current hot topic of discussion around the world. There are numerous arguments for and against the practice, with some saying a wealth tax might be inequitable and place more of a burden on the middle class than the rich, and others saying a moderate, progressive tax is a reliable way to generate revenue for services and development, among other statements. These are all valid points.
In South Africa, with tax increases looming, although not yet finalised, there have been calls for other avenues of generating revenue to be explored, as low-income households and small businesses would be severely affected. While National Treasury has mooted a simultaneous increase in the number of zero-VAT-rated consumer goods as a buffer, there are concerns that this may not be enough.
However, there is a more persuasive case for taxing the super-rich – those ultra-high net worth individuals (HNWIs) whose assets run into the billions of dollars and whose annual wealth accumulation easily outstrips the payment of an income tax.
“Put simply, most billionaires around the world pay negligible income tax relative to their economic income, and are thus undertaxed,” writes Michael Marchant, Open Secrets’ head of investigations, for Daily Maverick.
And in fact, many billionaires and millionaires are prepared to do this. A movement called Proud to Pay More was set up a few years ago with the intention of addressing wealth inequality and calling for wealth taxes. It is not the first such movement to do so – Patriotic Millionaires released a report titled Polling on Extreme Wealth in G20 Countries, in which the organisation presented data from surveys around the world supporting the redistribution of wealth through taxes.
“Taxing extreme wealth not only addresses the problem of the regressivity of the income tax system for the ultra-rich but also reduces overlapping inequalities and ensures that those who have contributed the most to the planet’s destruction pay their fair share,” says the Tax Justice Network (TJN), a firm advocate for a super-wealth tax.
In its 2024 working paper Taxing extreme wealth: what countries around the world could gain from progressive wealth taxes, the organisation puts forward country-level estimates on how much could be gained from implementing a moderate progressive tax on super-wealthy individuals. Progressive taxation refers to a tax rate that increases as taxable income increases and is already used in South Africa, though not as a wealth tax – such a mechanism could be used to even greater effect, says TJN, if the super-wealthy are included.
Furthermore, says the organisation, if such a tax is accompanied by beneficial ownership disclosure, this would “not only facilitate the effective enforcement and administration of the wealth tax but also have positive effects on mitigating many other types of illicit financial flows, including money laundering, corruption, terrorist financing, and drug trafficking”.
TJN uses the rates imposed by Spain’s “solidarity surcharge”, introduced at the end of 2022, as an example other countries could follow. “Our analysis indicates that such a tax could lead to an average increase in national budgets of 7% each year. This equates to a potential global revenue of more than US$2-trillion, which is double the amount needed for developing countries’ external climate finance.”
Enhancing transparency and accountability
“Asset beneficial ownership is not merely ancillary but essential for the effective enforcement of wealth taxes,” state TJN’s Andres Knobel and Markus Meinzer in their paper titled Asset beneficial ownership – Enforcing wealth tax & other positive spillover effects, which was published in February 2025.
“Asset beneficial ownership transparency plays a pivotal role in preventing the under-reporting of wealth by identifying previously unknown HNWIs subject to wealth taxes as well as ensuring the taxable base of wealth taxpayers is complete (and that liabilities are truthful and legitimate).”
Achieving these objectives, they add, enhances fairness and progressivity, enabling countries to impose appropriate marginal wealth tax rates on the wealthiest individuals.
There are two key elements on which the successful enforcement of a wealth tax depends: the availability of information on their identity and on their wealth subject to tax – this may include specific types of assets or be more general, including any asset above a certain value.
The extent of liabilities must also be established, say Knobel and Meinzer. They add that taxpayers generally are more hesitant to disclose their assets than their liabilities, because the latter will reduce the taxable base. This is the task for authorities – to ensure that information disclosed is truthful, comprehensive, and legitimate.
Beneficial ownership transparency can assist here. “Suppose the taxpayer fails to declare their wealth (eg a mansion). If the only data that authorities know from the real estate registry is that the mansion is owned by an offshore company (but the owner of the company remains hidden), the taxpayer (the beneficial owner of the mansion) could easily escape paying the wealth tax.”
Asset beneficial ownership ensures wealth tax progressivity by fulfilling four critical functions, say Knobel and Meinzer.
- It ensures the completeness of the taxable base of a (known) HNWI, taxing all their wealth.
- In the case of “net” wealth taxes, asset beneficial ownership allows tax authorities to challenge liabilities declared by the wealth taxpayer that appear fake (eg a self-made loan).
- It allows the application of the corresponding tax rate.
- It identifies unknown HNWIs.
“Asset beneficial ownership transparency extends beyond wealth taxes, generating positive spillover effects to tax income and capital gains, and strengthening efforts to combat illicit financial flows such as money laundering and corruption.”
For those billionaires who intentionally maintain a low profile because their wealth was illicitly acquired, such as through corruption or drug trafficking, such information becoming known to authorities would curb those illegal activities.
Taxing the rich
On average in each country, says TJN, just 3% of all wealth is owned by half the population, while the richest 0.5% own a quarter (25.7%) of the wealth.
In South Africa, writes Marchant, the combined wealth of the six richest people adds up to a mind-boggling R553-billion, “while about 14-million people do not have the R27 a day needed to be above the food poverty line. We should not lose sight of the fact that inequality is the fundamental injustice that South Africa’s economic policy must address”.
Those six richest South Africans alone, says Marchant, if taxed on those billions at just 2% annually, would contribute about R11-billion to South Africa’s fiscus. This is equal to more than two years of the National Prosecuting Authority’s annual budget, he says, adding: “Importantly, this would pale in comparison to the nearly R80-billion growth in these individuals’ collective wealth last year, indicating that such a tax would not be unsustainable.”
The TJN estimates that South Africa could bring in nearly $9.5-billion extra (about R170-billion at today’s exchange rate) in potential tax revenues from implementing a tax on net wealth with rates similar to the Spanish solidarity surcharge, which applies to the richest 0.5% of its households. Tax rates range from 1.7% to 3.5% as an annual sum payable.
“A 68% majority of adults across 17 G20 countries are in favour of wealthy people paying a higher tax on their wealth as a means of funding major changes to the economy and lifestyles,” says TJN, citing this survey conducted by Earth4All.
And as indicated at the beginning of this article, nearly three quarters of millionaires polled in G20 countries support higher taxes on wealth, says the organisation. “Over half of them think extreme wealth is a ‘threat to democracy’.”
