New SA tax bracket will chase away entrepreneurs and job creators
Seeff property group says that while a raised threshold of transfer duty exemption as announced in the Budget 2017, is most welcome for the property market, a new tax bracket for the rich is not.
“We always knew that this was a budget that was set to bring a higher tax burden, especially for the wealthy and tougher times for consumers on the whole as Treasury needed to find an extra R28 billion in a shrinking economy, said Samuel Seeff, chairman of the Seeff property group.
He said that under the circumstances, finance minister Pravin Gordhan’s budget is reasonable, save perhaps for concerns around the growing tax burden for the wealthy.
“The raising of the threshold for transfer duty exemption from R750,000 to R900,000 effective from the 1st March is the most positive and welcome outcome. It will certainly enable more first time home buyers to get onto the property ladder,” Seeff said.
That said, the cost of home ownership remains high with home owners burdened with rising property taxes, sectional title levies and ever-higher basic utility costs, the property group pointed out.
Seeff said that while the increase in taxation of the wealthy in the form of a new top marginal bracket (45% for annual earnings of R1.5 million-plus) and higher dividend tax (up from 15% to 20%) may unfortunately be necessary, “we are concerned at the growing burden at the top end”.
South Africans who earn more than R1.5 million a year will form part of a new tax bracket who, along with smaller adjustments to the existing tax brackets, will add an additional R16.5 billion to the fiscus, Gordhan announced on Wednesday.
Globally, the group said that it has seen that burdening wealthy citizens with higher tax does not create more government income, but tends to have the opposite effect. “These are generally your entrepreneurs, business owners, captains of industry and job creators. Higher taxes is likely to see more wealth leaving the country,” Seeff said.
“It may potentially also take the liquidity out of the top end of the property market. As we have seen over the last year, the higher transfer duty and Capital Gains Tax impacted sales negatively. The negative sentiment also meant that despite a weak rand, fewer foreigners bought property despite the fact that we welcomed record numbers of foreign visitors over the summer,” the company lead said.
Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, said that anyone still viewing the country’s medium term economic outlook through rose-tinted spectacles had them rudely ripped off by the finance minister on Wednesday.
“There are unquestionably harsh times ahead,” Geffen said.
“We’re immensely grateful there was no increase in VAT, but the new super tax bracket of 45% for individuals who earn more than R1.5 million isn’t good news for the upper end of the residential property sector.
“And while we applaud the raising of the property transfer fee threshold to R900,000 from R750,000, in reality it will only provide relief for low to lower-middle income households.
Geffen noted that minister Gordhan uttered the word ‘transformation’ more than 50 times in his 29-page speech. “He is not wrong that transformation is needed in South Africa, but not at the expense of the tax-payers on whose backs the economy is built.
“With an unemployment rate of more than 26% in the last quarter of 2016, businesses big and small need all the help they can get from the government right now, and in this budget they were largely ignored. That’s bad business for the economy, for consumers and for home-owners.”
Loading ...