Financing Options for a Universal Basic Income Guarantee in South Africa

The Institute for Economic Justice proposes a suite of financing mechanisms to fund a Universal Basic Income Guarantee (UBIG) in South Africa, focusing on progressive taxation and the reduction of government waste. Key proposals include a ring-fenced Social Security Tax (SST) with rates between 1.5% and 3%, a Resource Rent Tax on extractive industries, and the selective removal of tax deductions for high-income earners regarding pension funds and medical aid. The brief also suggests implementing a 25% luxury VAT, a wealth tax for the top 1% and 0.1%, and a Financial Transactions Tax (FTT) of 0.1%. Additionally, it argues for the cancellation of the Employment Tax Incentive and the reversal of proposed Corporate Income Tax reductions. The document concludes that many UBIG scenarios, particularly those aligned with national poverty lines, are affordable without borrowing if these revenue-generating measures and reductions in irregular government expenditure are adopted.

• The annual cost of a UBIG varies significantly by target group and payment level; for all adults (34.1 million people), the cost ranges from R239 billion at the Food Poverty Line (R585 pm) to R1.432 trillion at R3,500 pm.
• A proposed Social Security Tax (SST) would be a ring-fenced, progressive tax on taxable personal income ranging from 1.5% (for income R0 to R80,000) to 3% (for income over R1 million), estimated to generate R62.20 billion in 2022/23.
• A Resource Rent Tax (RRT) targeting the economic rent of extractive industries, such as mining, could generate approximately R38.80 billion in 2022/23, assuming a tax rate of 25% on total resource rents.
• The brief proposes removing tax benefits for high earners, specifically the pension fund contribution deduction for those earning above R1 million per annum (estimated R22.04 billion in 2022/23) and the medical aid tax credit for the main member and first dependent for those earning above R500,000 per annum (estimated R6.03 billion in 2022/23).
• Wealth and property tax options include a wealth tax of 1% for the top 1% and 3% for the top 0.1% (estimated R59 billion), a Financial Transactions Tax (FTT) of 0.1% (estimated R41 billion), and increasing the Securities Transfer Tax (STT) from 0.25% to 0.3%.
• Corporate tax reforms include reducing profit shifting by Multinational Corporations (MNCs) by 25%, cancelling the Employment Tax Incentive (ETI), and reversing the proposed reduction of the Corporate Income Tax (CIT) rate from 28% to 27%.
• Reducing government inefficiency could provide significant funding; a 30% reduction in irregular expenditure at national and provincial departments and SOEs would free up R36.4 billion per year.
• The document concludes that 17 UBIG scenarios at the Food Poverty Line, Lower-bound Poverty Line, and Upper-bound Poverty Line are immediately affordable without borrowing if the proposed tax and expenditure measures are implemented.

APA

Institute for Economic Justice (2021). Financing Options for a Universal Basic Income Guarantee in South Africa. https://www.iej.org.za/wp-content/uploads/2021/07/IEJ-Policy-Brief-Financing-a-UBIG.pdf

Chicago

Institute for Economic Justice. Financing Options for a Universal Basic Income Guarantee in South Africa. 2021. https://www.iej.org.za/wp-content/uploads/2021/07/IEJ-Policy-Brief-Financing-a-UBIG.pdf.

Wikipedia

{{cite report |author=Institute for Economic Justice |title=Financing Options for a Universal Basic Income Guarantee in South Africa |date=July 2021 |url=https://www.iej.org.za/wp-content/uploads/2021/07/IEJ-Policy-Brief-Financing-a-UBIG.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{instituteforeconomicjustice2021financing, author = {{Institute for Economic Justice}}, title = {{Financing Options for a Universal Basic Income Guarantee in South Africa}}, institution = {Institute for Economic Justice}, year = {2021}, month = jul, url = {https://www.iej.org.za/wp-content/uploads/2021/07/IEJ-Policy-Brief-Financing-a-UBIG.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }