Written by: Rohann Eloff
In this world, as Benjamin Franklin said, nothing can be said to be certain, except for death and taxes. Today we are faced with the bizarre: Tax in death.
If you are to accept estate tax, then you accept that a part of your estate is not your property at all. The underlying premise of estate tax is, after all, that your life earnings and belongings actually belong to the state, and that private property is a privilege. The danger of this train of thought should be obvious.
For what reason does the state have a claim on 20% of a testator’s estate? If it is to compensate for the expenditures to maintain infrastructure and public services, then what is personal income tax for? The fact of the matter is that South Africa’s tax legislation is busy strangling the goose that lays the golden eggs.
Regardless of how one feels about taxes in principle, most people will admit that it seems bizarre that money, which has been left for others, is taxed. This very same money that now makes up the deceased’s estate has already been taxed throughout its metaphorical life – in the form of capital gains tax, income tax and whatever other taxes happened to come up.
One of the fundamental principles in a tax system is the rule against double taxation.
In the implementation of South Africa’s tax law, however, this principle is only deemed applicable during tax deductions phase – and not during inclusions. A prime example of this is the tax on one’s estate. This tax money is well-earned and taxed during the life of the testator – but is then taxed again during the estate administration process (at 20%, with a discount of R3 500 000 deductible from the whole estate value).
Often an argument made in support of estate tax is that the heirs of the estate do nothing to deserve this inheritance. In considering when and how the line is to be drawn to determine what is a morally acceptable amount that may be, this argument is revealed to be very strange indeed. This determination is quite arbitrary and underlines the faulty logic in this argument. If the testator is able to dispose of his or her property while alive, how does the exact same property fall within the purview of the state at the moment of his or her death?
Another argument often made in favour of estate tax, is the mere fact that the model has long been used in South Africa, and is still being used internationally. Countering this argument is simple: Just because something occurs often does not make it moral or even economically effective. Democracy cannot be used to take away the private property of others. You cannot vote to steal – it is as simple as that.
A final argument, often made by progressives who support estate tax, is that it is a highly effective tax that only places a burden on a small number of people. No religion, moral framework or system of ethics ever justifies harmful actions as moral purely because the actions only affect and harm a handful of people. If it is not okay to steal from these same small number of rich people while they live – it is not okay to do the same straight after the moment of death.
Engaging in free transactions between individuals – especially in the form of inheritance – is a fundamental freedom that all people should enjoy, and estate tax infringes on this very core freedom. The pervasive certainty of death is enough for this life of ours. Let us rather not combine this with pervasive taxation as well.
Author: Rohann Eloff is a second year BCom (Law) student at the University of Pretoria. He is also the Vice-Chair of the UP Debatsvereniging and enjoys sitting on the Residence Management Committee of TuksVillage. In 2016 Rohann was one of the founders of the Tuks Leadership and Individual Programme where he currently serves as the Head of Leadership Development. He is also a regular debate coach and former national schools debating winner.