SA could use a minimum wage, an income grant, women-centred land reform and subsidised social services to curb growing inequality, says Oxfam’s Ronald Wesso.
The government also needs to reform tax policies to be more pro-poor, said Mr Wesso, who heads research and policy at Oxfam. The organisation released a global report on inequality on Monday.
According to Oxfam, SA is one of the worst offenders when it comes to income inequality.
The government’s tax policies favour the rich and distribute wealth wrongly, Mr Wesso said.
Changing its tax policies would give the government the resources and income to finance the type of policy set they were proposing, Mr Wesso said.
SA’s richest 10% saw their income grow 64% from 1994 to 2011, while the earnings of the bottom 10% were unchanged over the period. Globally, 62 individuals’ cumulative wealth equalled that of 3.5-billion people last year.
Understanding the reasons behind widening income inequality was more important than merely reporting that the gap between the rich and the poor had widened, Free Market Foundation economist Jason Urbach said.
In SA’s case, great unemployment fuelled inequality.
The state should focus on policies that promote growth, Mr Urbach said. Wealth taxes were not part of growth-promoting policy.
The report said most of the world’s rich hid their wealth in tax havens, countries in which tax rates are low or nonexistent. These states also guarantee the utmost secrecy over who holds funds.
Oxfam estimates that a global network of tax havens enables rich people to hide $7.6-trillion.
The organisation wants global leaders gathering for the World Economic Forum annual meeting in Davos, Switzerland, this week to deal with tax havens. SA will be represented at the meeting by President Jacob Zuma, Cabinet ministers and business people.
The Davis Tax Committee has dealt with tax avoidance in the Base Erosion and Profit Shifting interim report and has been collecting more input from stakeholders.
The report noted that, while it was "difficult to reach a solid conclusion" about how much base-erosion and profit-shifting occurred in SA, South Africans were participating in offshore investments and minimising global tax exposure.
See the full report here: Oxfam International