Imposing larger taxes on the wealthy is a surefire way to prompt the financial emigration of successful business people. These individuals’ skills and abilities have helped them generate wealth, create jobs, and, consequently, bring more taxpayers into the system.
The government’s rationale for increasing taxes on the wealthy becomes clearer when considering South Africa’s high Gini coefficient, which measures income inequality. It is easy for the government to think, “These people have a lot of money; let’s redistribute this wealth.”
However, what the government fails to understand is this: “Things or resources in or on the ground, don’t create money—people do.” If we want our country to prosper, we must enable our people to thrive economically.
Take, for example, Thailand. With a similar population size and GDP per capita to South Africa, Thailand has managed to achieve an unemployment rate of under 1% (0.56%) and has one of the highest happiness indices globally. How did they do this? They created a welcoming environment for expatriates who have helped build businesses across various sectors such as tourism, hospitality, agriculture, and manufacturing.
These skilled foreign entrepreneurs create jobs in ways that governments alone cannot. As a result, the tax base expands, leading to increased tax revenue without the need for punitive wealth taxes.
A Potential Solution for South Africa:
Send trade unionists on a month-long visit to Thailand to observe how relaxed labor laws and encouragement of foreign entrepreneurship can significantly benefit the local economy. By simplifying foreign direct investment (FDI) processes and easing immigration for skilled entrepreneurs, South Africa can create a more vibrant business environment. This approach could address not only fiscal issues but also tackle crime, education, housing, debt, inflation, and other socio-economic challenges.
Making the process of establishing businesses frictionless for both locals and foreigners is crucial. There are many strategies that the government can employ before resorting to wealth taxes, even if the latter may be appealing for political gain among the unemployed majority.
The excuse, “But this is Africa,” is no longer acceptable. We have the potential to do better for our people. The era of politicking in Africa must end. Instead, we should focus on empowering our people with skills and education, embracing free-market principles to grow our tax base and our economies.
CEO InUversal Group of Companies
