Abstract
Orientation: South Africa is a country where the vast majority of residents experience inequality, poverty and deprivation on a daily basis. For many black South Africans, their experience includes the expectation to financially support extended family. Research purpose: This ‘black tax’ provides the government with an opportunity to redistribute wealth through taxation provisions. The study’s purpose is to consider whether South African taxation legislation currently provides for black tax and if not, to provide suggested improvements. Motivation for the study: Whilst South Africa already has a social grant system in place, there is a need to account for varying levels of taxpayer responsibility and to encourage less dependence on the government. Research approach/design and method: Using a doctrinal research methodology, the authors collated relevant legislation and judicial precedents applied in South Africa with respect to supporting extended family and compared these to the taxation systems in the United States of America (USA), Brazil and Nigeria. Main findings: The findings indicate that the current South African taxation legislation does not provide for supporting extended family, including black tax, and the US dependent exemption or rebate is a potential option for consideration in South Africa. Practical/managerial implications: Taxpayers should encourage the South African government to develop a discussion document to encourage wider discourse. Contribution/value-add: The study makes an important contribution to the debate on changing taxation legislation to ensure income and wealth redistribution.
Highlights
Inequality, poverty and deprivation are a part of black South African life (Gradín 2013; Idahosa & Van Dijk 2016)
Main findings: The findings indicate that the current South African taxation legislation does not provide for supporting extended family, including black tax, and the US dependent exemption or rebate is a potential option for consideration in South Africa
In the South African tax system, the deductions available to individuals who do not carry on a trade in their own name are extremely limited because of the focus on only granting deductions for expenditure incurred to earn taxable income (Haupt 2019)
Summary
Inequality, poverty and deprivation are a part of black South African life (Gradín 2013; Idahosa & Van Dijk 2016). A harsh reality of many black South Africans is the financial burden of having to support direct and extended family. This is colloquially known as ‘black tax’, and evidence suggests that it may help lower inequality in South Africa (Mangoma & Wilson-Prangley 2019). This study focuses on the deductibility, exemption or tax credit of black tax in the context of South African legislation. The study considers whether these other countries’ treatment of private transfers could be adapted for South Africa. This study begins by reviewing previous research on inequality, black tax and taxation in general, with particular reference to the South African context. Conclusions are drawn on application in the South African context
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