South African Business Wary Of ‘Social Responsibility Tax’

by Robert Lee, Tax-News.com, London

12 October 2005

Members of South Africa's business and investment community have urged the government to proceed with caution with its plan to impose a 'social responsibility tax' on new property development, warning that if implemented at too high a rate, the levy could stifle investment.

The tax, which will be imposed at a rate of 20%, is a key part of Housing Minister Lindiwe Sisulu's radical housing plan designed to eradicate slums by 2014; proceeds from the the tax will underpin the funding of new housing for poor communities.

While the plan has been supported by various groups including builders, developers and estate agents, many have baulked at committing to the 20% rate, which they say is too high and will act as a disincentive to investment, particularly to foreign investors.

One developer was quoted by the Independent Online as saying that 20% would be a "huge percentage to sign away."

"In some cases developers make only about 20 percent profit," the developer stated.

Colin Boyes of the Cape Town Regional Chamber of Commerce and Industry added that "great care" should be taken by the government to maintain interest from foreign investors and called for further debate on the issue to ensure that South Africa gets it right.

"There is a very fine balance here. Upliftment of the poor should be high on the agenda and we understand that, but we should not lose sight of the productive part of the economy," Mr Boyes stated.

Recommended