Squeeze the rich a little more

South Africa's growth rate for the second quarter dropped to 1.4%. That causes the expected 2011/12 annual growth rate to slip back to 3.4% - spot on the National Treasury forecast of February 2011.

But right now only about a third of the fiscal year's taxes are collected and SARS could still come up short.

Even if tax collections are on track, the Minister of Finance, Pravin Gordhan, needs more, lots more. Just to finance the start-up of National Health Insurance will cost more than R100-billion.

Last Sunday's Business Times showed the enormous wealth of the privileged. So what's wrong with stiffing them with the bill, either by increasing super-tax beyond the current 40% or by imposing a wealth tax as suggested by Archbishop Desmond Tutu? Even Warren Buffett agrees that billionaires are "coddled".

This week Standard Bank CEO Jacko Maree set the standard by pledging 10% of his earnings to education for needy people. Hopefully many will follow this example.

The 20 wealthiest South Africans are apparently worth R112-billion. So if the government nicked the lot it might pay for the implementation of NHI.

SARS estimates there are 3000 ultra-high net worth individuals (gross assets greater than R75-million or annual income more than R7-million) and only 280 are registered for tax; and that there are 150000 taxpayers earning above the super-tax threshold of R580000 who pay the top 40% marginal rate.

The queue for the child support grant is more than 100000 people long every month. More frightening is that about the same number turn 18 every month, lose their child grant, and disappear onto the streets with a bum education. No wonder Juju has such a following.

On April 1, dividend tax replaces secondary tax on companies. The rates are the same but dividends tax exempts all company-to-company distributions, as well as dividends paid to retirement funds. Then, dependent on shareholding, a lower rate applies to distributions to non-resident shareholders. The STC tax base is currently worth R17-billion a year. These new exemptions will halve that.

Company tax has already fallen below 24% of total tax collections while individual tax has increased to above 35% and VAT to 28%.

Perhaps in next month's medium-term budget framework speech, Gordhan should announce a further delay in dividend tax implementation. The challenges ahead are too big to further erode the corporate tax base.

• Lester is a professor at the Rhodes University Business School. For more go to www.criticalthought.co.za