Parks Tau’s tax plan deters investors

Attending the World Economic Forum in Davos this week – and hosting the G20 summit in Johannesburg later – South Africa has marketing opportunities as an investment destination.

Former Joburg mayor Parks Tau could ruin that by forcing businesses, including foreign companies, to pay an additional 3% tax towards a R100-billion “transformation fund” to help black businesses exclusively.

As minister of trade, industry and competition, Tau is threatening to penalise companies which do not contribute.

Answering a parliamentary question by DA MP Toby Chance, Tau said the fund would be financed by enforcing broad-based black economic empowerment (B-BBEE) codes. B-BBEE is often a vehicle for corruption where people are rewarded solely for being black and connected.

Noncompliant companies will be fined and excluded from government contracts. Multinational businesses must set aside for “transformation” up to 25% of the value of their SA interests.

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This toxic concoction of race-based, heavy-handed government intervention is a turn-off for international and local investors. ANC ideologues are clueless about economics.

Forever squeezing more out of those who produce wealth is counterproductive. Diminishing returns are inevitable, leading to disinvestment, lower growth and fewer jobs.

Throttling the goose that lays golden eggs.

This practice of taking from wealth-producers and giving to nonproducers is established. Over 26 million South Africans receive social grants, funded by a dwindling taxpayer base.

The Daily Investor warns the country’s personal income tax base is highly concentrated, with a small number paying most tax.

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SA has 1 660 182 people who earn over R500 000 per year, with a taxable income of R1.5 trillion. This small group of people, accounting for under 3% of the population, pay 76% of all personal income tax.

Rich citizens are mobile, leaving the country in droves.

In its treatment of businesses and individual taxpayers, the government is disincentivising wealth creation and encouraging dependency.

Not a winning formula. Neither is the racial overlay, where black businesses receive exclusive support from the proposed transformation fund and other black empowerment legislation.

Chance, the DA spokesperson on trade, industry and competition, says the party will not support Tau’s “madness”. He says the announcement of the fund undermines the Cabinet and the government of national unity (GNU) because necessary discussions and approvals have been bypassed.

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It is a sign of President Cyril Ramaphosa’s weak leadership that Tau felt bold enough to provide an answer in parliament about this transformation fund without going through GNU or the Cabinet.

Dithering Ramaphosa is also taking too long to act against Gauteng premier and ANC provincial leader Panyaza Lesufi over the party’s 34.75% election performance in SA’s richest province.

Under Lesufi’, governance in Gauteng metros has collapsed.

Ahead of the G20 summit, we can expect frenetic attempts at Potemkin-like facades in parts of Johannesburg, but the rot is too widespread to conceal.

Potential G20 investors will be put off by former mayor Tau’s punitive tax. And they will see that Joburg is not a world-class city. Traffic signals will malfunction. Sewage, water, potholes, garbage and homeless will adorn the streets.

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Putting lipstick on a pig is not a good marketing tactic. And dressing up legalised theft as “transformation” will fool no-one.