Should African states impose a wealth tax on the super-rich? – DW – 03/09/2025 | EUROtoday

While all governments battle to seek out funds for higher healthcare, faculties, roads and different providers, African international locations are disproportionately groaning below an ever-increasing debt burden.

For years now, African governments have, on common, spent extra on debt repayments than on healthcare.  Inflation, in the meantime, is additional decreasing their means to take a position. To break this cycle, governments wish to faucet into new income sources.

“Many countries are opting for the easiest route, reaping the rewards that hang lowest,” says tax knowledgeable Alvin Mosioma. He is the deputy director of an financial and local weather program on the Open Society Foundation in Nairobi.

“Governments levy consumption taxes because they know that people need to consume. You cannot escape such a tax,” Mosioma tells DW.

New client taxes face the wrath of residents

In Kenya, residents, already reeling from inflation, had been enraged by the prospect of new taxes. After President William Ruto’s June 2024 announcement to cut back the nationwide debt by way of new taxes on meals and client items, common protests exploded, forcing Ruto to withdraw the plans and change giant components of his cupboard.

The resistance, which was primarily supported by Generation Z, additionally impressed individuals in Nigeria, Uganda and Ghana to stage their very own demonstrations.

There, the main target was much less on particular authorities plans and extra on the ever-increasing value of dwelling, which locations a heavy burden on poorer individuals particularly.

According to Mosioma, every nation should calculate the extent of wealth individually to find out how you can sort out inequality.

“We should not limit ourselves to saying that the rich are dollar millionaires or people who are on the Forbes list. In Kenya, someone with a fortune of 50 million shillings (around €372,000) is rich compared to someone who has nothing.”

Calls for a wealth tax are getting louder

The hole between wealthy and poor is widening — and never simply in Africa. A brand new report from the NGO Oxfam says that the poorest 60% of humanity have misplaced a mixed US$20 billion in wealth since 2020.

At the identical time, all billionaires have turn into richer by US$3.3 trillion in the identical timeframe. Their wealth, writes Oxfam, “has grown three times faster than the rate of inflation.” The NGO is due to this fact proposing a wealth tax — however that is hardly the primary time the thought has been floated.

In November, the G20, below Brazil’s management, agreed on a compromise components for more practical taxation of the super-rich. A proposal to impose an annual tax on the super-rich amounting to 2% of their wealth failed as a result of opposition from Germany and the USA.

South Africa has made this a precedence as a part of its present G20 presidency. In April 2020, a number of South African lecturers known as for the introduction of a solidarity wealth tax to finance coronavirus help with the proceeds. One of them was economist Aroop Chatterjee, who researches wealth inequality at Witwatersrand University in Johannesburg.

“To combat inequality, you have to go below the surface and influence the processes that cause inequality. A wealth tax is just one political tool that we have proposed to generate revenue. Much more needs to happen after that,” he stated to DW.

The deterrent impact of a wealth tax should even be taken under consideration: “There is always the risk of capital flight, i.e. legal tax avoidance and illegal tax evasion,” says Chatterjee. “But we have generously factored both into our calculations.”

South Africa has essentially the most millionaires – and the best inequality

No different nation on this planet has such an unequal distribution of earnings as South Africa. In the World Bank’s calculations, it repeatedly takes the highest spot within the so-called Gini coefficient, a mathematical indicator that makes inequality elsewhere comparable.

Chatterjee blames South Africa’s historical past and establishments, akin to: “the patterns of accumulation formed during the colonial era and apartheid. This includes racial discrimination in land ownership and economic participation in general.”

In truth, South Africa can also be highlighted by different surveys. For occasion the “Africa Wealth Report” by the British wealth consultancy Henley & Partners lists 37,400 greenback millionaires in South Africa, referring to individuals whose property exceed a million US {dollars}.

That is greater than 1 / 4 of all African millionaires. And nearly one in ten African greenback millionaires lives in Johannesburg, adopted by Cape Town in second place.

The report refers back to the “big 5” African millionaire international locations: South Africa, Egypt, Nigeria, Kenya and Morocco. The tax haven of Mauritius occupies a particular place, the place a rise of 87 p.c was measured from 2013 to 2023.

The authors predict the variety of millionaires in Africa will enhance by 65% by 2033. Social disparities might due to this fact turn into much more excessive, though they’re already a supply of social stress.

Many politicians can be “cutting themselves in half”

At the Open Society Foundation, Alvin Mosioma sees very sensible hurdles for states to tax the richest extra closely. Not least, that tax authorities typically don’t even know what property exist within the type of actual property, investments and funds.

The wealthy can shift their property so rapidly that the state can hardly sustain. Nevertheless, the tax authorities in Kenya and Uganda now have specialised items that deal completely with the richest people, says Mosioma.

Another hurdle is that politicians in Kenya, for instance, are sometimes very rich and would due to this fact be personally affected by a wealth tax.

Mosioma speaks of a “rise of the oligarchy” – which might be noticed. “Effective wealth taxation can only be promoted by politicians who are not pursuing their own interests. They have to be part of the political elite, but they must not cut themselves in two for their own economic interests,” says Mosioma.

One potential beacon of hope is the brand new authorities in Senegal, the place the left-wing opposition gained the elections final 12 months by a surprisingly giant margin.

Various components should due to this fact come collectively: Political will, environment friendly tax authorities and clear insurance policies. But a lot stays to be performed. So far, no single African authorities has used the instrument of wealth tax to sort out inequality and make the richest contribute extra to financing the frequent good.