If you're wealthy or your earnings have been tucked away in tax-efficient vehicles, expect to pay much more to the taxman when the Katz Commission has completed its investigation into taxation.
This was the message from commission chairman Michael Katz, who told an Arbitration Foundation of South Africa meeting last week that his objective was to redistribute wealth as he sets about improving tax collection and administration.
"We recognise that indirect taxes are effective. They are easy to administer and collect. However, indirect taxes are regressive and bite hardest on the poorest in the population. This is unfair and will breed disrespect (for tax collection), which in turn leads to evasion and avoidance. Until there's targeted poverty relief directed in an effective manner, it is not fair to tax the poor.
"Three years ago, the IMF (International Monetary Fund) told us that the yield from VAT in South Africa was the third highest in the world. This is because we have so few (VAT) zero-rated products."
Katz said he was "opposed to fringe benefits" because they were unfair to people whose salaries were not structured to save tax.
"Also, if you give fringe benefits, it distorts resources and disadvantages small businesses because they are uncompetitive in recruiting."
Katz said the island of retirement funds outside the tax net was growing rapidly each year and was preventing a reduction in rates.
"I'm not saying that the 30 percent rate we suggested is right. We've given our recommendations and it's important that certainty is achieved."
Responding to criticism that the Katz Commission is imposing double taxation, he said: "Let's look at your estate. How much of it has never been subjected to taxation?
"There is a growing frustration about the taking away of concessions. We agree that the broader the base, the better it will be ... it will facilitate fairness. You achieve this through a better collection process, self assessment and better taxpayer education."
Katz said the commission has not recommended increased taxes.
"To achieve low rates of tax you need growth in the economy, better tax administration and a broadening of the tax base to bring everyone into the system. This should include scrapping exemptions.
"The total fiscal take from all tiers of government should not exceed the GDP (Gross Domestic Product) by 25 percent. Government has endorsed this," Katz said, emphasising that this included all forms of regional tax except user tax. An entrance fee at a regional council swimming pool is a user tax.
Predictability of the tax environment was important.
Katz said his commission canvassed the opinions of international businessmen on what they believed was crucial for investment in South Africa.
"Political risk, absence of exchange controls, labour relations, profitability and that tax rates should be internationally competitive in terms of being predictable and certain, were the items raised. A good tax administration is therefore fundamental to doing good business," he said.