Last week, Archbishop Emeritus Desmond Tutu, addressed an audience in Stellenbosch and called for a wealth tax to be imposed on all white South Africans. Over the last week, newspapers have been flooded with outrage letters about what a racist Tutu is, and how he should be stripped of his Nobel Peace prize. But is his proposition really that outrageous?
Consider the essence of Tutu’s call: white South Africans, regardless of whether they supported the apartheid regime or not, benefited from its policies. The fact that this benefit was unfair, is one that cannot be refuted. The Archbishop’s call last week, is an attempt to make amends for that unfair advantage.
If one considers the corporate world, unethical behaviour that results in unfair benefit is punished by fines – take, for example, Pioneer Foods who were fined R195M for their role in the bread price-fixing saga in 2010. The only lot that expressed anything vaguely resembling outrage then, was Pioneer Foods. Even in that case, the facts were irrefutable.
Applying that principle, however, to many individuals is not quite so simple. The obvious point of distinction is that not all whites benefited equally from apartheid. Surely then, it would be unfair to impose an equal penalty on all whites – wealth tax or otherwise.
Further, since apartheid was dismantled, another group of individuals also derived an unfair advantage from the new regime. Through their connections and often their own positions in the political food chain, they managed to secure lucrative deals for themselves. Why should this unfair advantage not be fined?
The answer, in terms of a practical way forward, lies in one word: wealth. All this unfair advantage has to amount to something, and wealth is it.
Regardless of race, Wonkie believes South Africa should impose a once-off wealth tax – and the emphasis here is on once-off. The goal of this tax should be to make reparations for unfair advantage and the only criteria for discrimination is the amount of wealth – not race.
Yes, there will be some that acquired their wealth through fair and ethical behaviour, so there will be collateral damage. With measures like this, it would be hard to avoid it but Wonkie advocates, particularly given the severely skewed distribution of wealth in South Africa, that this damage will likely be minimal.
The reason the penalty should be a once-off tax and not an ongoing tax, is that history has clearly demonstrated the benefits of free market principles. The free market is fundamentally based on competitors aspiring to gain advantage over each other. This advantage, one would expect, would be regulated by the likes of an honest Competition Commission and the judicial system after the once-off tax is implemented. That after all, is their job.
Of course, there are a couple of essential prerequisites for implementing such a tax and South Africa is very far from having either of these in place.
- An accountable government that is largely free of corruption; and
- A concrete plan of action for redress, together with measurable performance metrics
Without both the above conditions in firmly place, any wealth tax would be worthless for its true purpose. At worst, it would be pocketed by thieving scoundrels that are unworthy. At best, it would be squandered by incompetent government officials who would insist they are focused on service delivery.
Also, read Pierre de Vos’s excellent article on this subject at Constitutionally Speaking.