Davis doesn't believe wealth and gambling taxes viable options to plug deficit in new budget

CAPE TOWN - Following Thursday's withdrawal of a planned value-added tax (VAT) hike, the pressure is set to increase on the taxman to collect more money through personal income and other taxes.

Treasury will now also have to consider proposals from political parties to plug the deficit in a new national budget.

Judge Dennis Davis, who chaired Treasury’s tax review committee between 2013 and 2018, doesn't believe options such as wealth and gambling taxes as proposed by some opposition parties are viable options to pursue as immediate alternatives.

With the finance minister planning to also withdraw the two main money bills that allocate funds to departments and provincial governments, Treasury has its work cut out for it to weed through alternate proposals to generate revenue.

Speaking to the Cape Town Press Club this week before the VAT withdrawal was announced, retired judge and tax expert, Davis, said that introducing a wealth tax was more complicated than it sounded.

"You have to have an asset base to have a wealth tax, otherwise what’s the basis of the tax going to be? Are you taxing credit, are you taxing land, what is it that you tax?"

Davis said that a tax rate equal to the return on the asset would be akin to confiscation and could result in constitutional challenges.

"If you are going to have a low rate, depending on the assets that you choose, what return are you going to get?"

Davis said that a tax on online gambling would also be tricky to impose, given many of these operations were located in tax havens.