South African Capital Gains Tax Targets Investors, Say Critics

by Robert Lee, Tax-News.com, London

02 October 2001

The South African Democratic Alliance Finance Spokesman, Pierre Rabie, has criticised the government over its implementation of capital gains tax, which came into force on Monday, saying that the move had aggravated the position of investors.

The introduction of CGT, which was delayed in April for six months, is expected to bring the South African government between R1 billion and R2 billion in additional revenue, and will be levied at an effective maximum rate of 10.5% for individuals and 15% for companies. Primary residences will be exempt from CGT up to a maximum of R1 million gain, and personal vehicles will also be excluded.

However, critics warn that South African and foreign investors, and as a result the country's stock market, will be hit hard. 'The Democratic Alliance has opposed CGT from the very beginning and we still think it is an unfair tax and acts as a disincentive to foreign investment,' explained Mr Rabie, pointing to the US, Australian, and UK markets, where CGT reform is being tentatively examined as a result of the negative impact on investment. 'The more tax one pays the less you can invest to pay tax on again.'

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