Reforming fiscal policies to reduce inequalities and eradicate poverty (SDG 1, 10)

This policy brief argues for the adoption of progressive tax instruments—including Financial Transaction Taxes (FTT), net wealth taxes, property taxes, and Resource Rent Taxes—to combat extreme poverty and economic inequality, particularly in Sub-Saharan Africa. It highlights the regressive nature of current African tax structures and provides a case study for South Africa, suggesting that a combination of these taxes could generate hundreds of billions of rands to fund social protection and basic income guarantees.

• Economic inequality is a global obstacle to addressing poverty and climate resilience, with wealth increasingly concentrated among private actors. Since the mid-1990s, the top 1% of the population has accumulated 38% of all wealth, while the poorest 50% have accumulated only 2%.
• Sub-Saharan Africa faces extreme poverty and high inequality, with the wealthiest 10% owning more than half of the region's wealth. The region's tax structure is regressive, relying heavily on consumption taxes; in 2021, VAT accounted for an average of 27.8% of total tax revenue in Africa, compared to 20.2% in the OECD.
• A Financial Transaction Tax (FTT) is proposed to increase domestic resource mobilisation and curb speculative financial flows. Estimates suggest an FTT could generate between $200 billion and $900 billion annually, with a 0.05% levy potentially raising $900 billion per year.
• Wealth taxes on the richest individuals are identified as a tool for poverty reduction and supporting a just transition. The EU Tax Observatory estimates that taxing the richest 3,000 people globally could raise approximately $250 billion, though the brief notes this primarily targets the Global North.
• Property taxation is described as an efficient and equitable revenue source because land assets are immobile, yet it remains underutilized in developing countries. These countries collect only 0.5% of GDP from property tax, compared to 2% in developed nations.
• The Resource Rent Tax (RTT) targets economic rents in the commodities sector (such as minerals and fossil fuels) that exceed production costs and required returns on capital. Because it only taxes profits above the required rate of return, it is theorized to have no impact on investment decisions.
• In South Africa, specific progressive tax measures could generate significant revenue for 2023/24: a Net Wealth Tax (3-7%) could raise R70-R160 billion, a broadened Financial Transaction Tax (0.1%) could raise R41 billion, and a Resource Rent Tax (25%) could raise R38 billion.
• South Africa's wealth distribution is highly skewed, with the top 1% owning 55% of national wealth and the richest 10% owning 99.8% of bonds and stock. The brief suggests that increasing the dividend tax from 20% to 25% would have raised approximately R8 billion in 2023.

APA

Mncube, Z., & Mochoge, D. (2024). Reforming fiscal policies to reduce inequalities and eradicate poverty (SDG 1, 10). African Forum and Network on Debt and Development. https://afrodad.org/news-events/articles/taxation-wealth-eradication-poverty-and-inequality

Chicago

Mncube, Zimbali, and Diana Mochoge. Reforming fiscal policies to reduce inequalities and eradicate poverty (SDG 1, 10). African Forum and Network on Debt and Development, 2024. https://afrodad.org/news-events/articles/taxation-wealth-eradication-poverty-and-inequality.

Wikipedia

{{cite report |last1=Mncube |first1=Zimbali |last2=Mochoge |first2=Diana |title=Reforming fiscal policies to reduce inequalities and eradicate poverty (SDG 1, 10) |publisher=African Forum and Network on Debt and Development |date=12 September 2024 |url=https://afrodad.org/news-events/articles/taxation-wealth-eradication-poverty-and-inequality |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mncube2024reforming, author = {Mncube, Zimbali and Mochoge, Diana}, title = {{Reforming fiscal policies to reduce inequalities and eradicate poverty (SDG 1, 10)}}, institution = {African Forum and Network on Debt and Development}, year = {2024}, month = sep, url = {https://afrodad.org/news-events/articles/taxation-wealth-eradication-poverty-and-inequality}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }