In an article published in Fin24 (by Lameez Omarjee):
Parliament was informed of a new contributory pension system designed to drive “forced savings” in order to help individuals build assets which can be invested. This pension system may be subsidised for the poor in South Africa thereby directly impacting on poverty and inequality.
Marek Hanusch, a senior economist for the World Bank’s global practice for macroeconomics spoke to Parliament’s Standing Committee on Finance (SCOF) and highlighted the organisations model that aims to reduce poverty and equality.
Hanusch suggests that such a contributory fund, if subsidised, may empower the poor in South Africa to build assets and can be regarded as a form of redistribution.
He is quoted as saying: “We agree that building assets for poor people in South Africa is extremely important, a contributory pension is one way of doing it.”
The research highlights that only a small percentage of SA’s workforce is covered by an occupational pension scheme, ie. one-third of 32 million workers. The implication is that a large number are part of the group that are not covered. This includes the unemployed, informal workers and others not in the general labour force.
Hanusch informed that a pension fund of this nature would stimulate economic growth as it would be a “forced saving” that individuals will only be able to access at pension age.
The World bank’s research indicates that the fund represents an asset which could be invested in the JSE. This would result in ‘broad-based empowerment’ giving all South Africans a voice in South Africa’s corporate affairs, since all contributors would be paid dividends.
Quote from article: “The World Bank proposes that voting rights be delegated to pension fund managers – those from historically disadvantaged backgrounds – so that they could have a say in shareholder decisions.”
Hanusch suggests that property taxes be used to fund this initiative.
He is quoted as saying: “In many countries, municipalities finance themselves mostly through property taxes,”
He goes on to say that property tax in SA is not particularly high when compared to other countries who are part of the Organisation for Economic Co-operation and Development (OECD). Hanusch notes that government would have to reduce one or other tax in order to increase property tax.
What are your thoughts? Should property tax be a tax on the legacy of wealth? And should the tax be used to build wealth for SA’s poor? as suggested by Hanusch.