South African Government Criticised Over Capital Gains Tax

by Robert Lee, Tax-News.com, London

30 August 2001

As South Africa gears up for the introduction of capital gains taxes, a leading South African businessman and entrepreneur has criticised the government, saying that the new rules are unfair, and will be difficult to implement.

Johann Rupert, Chairman of Remgro and the venture capital company Venfin, has warned that Finance Minister Trevor Manuel risks killing the goose that lays the golden eggs by endangering South African businesses. He also fears that the next step could be the implementation of a welfare tax of between 1% and 2% on assets. As a capital gains tax automatically reveals all of a taxpayers assets, 'it can then be easy to introduce another direct tax on assets, such as in France,' he explained.

Mr Rupert, former head of the well-known Rembrandt Group also criticised the complexity and imprecise nature of the new CGT rules, saying that the Group's audit partners and legal firms had found them dense and difficult to understand. 'If our experts have taken so long to find out what the Act is saying, how will the ordinary person understand it?' he asked.

The entrepreneur also objected to the planned adoption of an American worldwide model of capital gains taxation, likening it to catching endangered fish species in South Africa with nets made by Americans. The amount of foreign direct investment coming into South Africa is far less than that received by the States, he explained at the Remgro/Venfin annual general meeting, which brings into question the logic of taxing capital formation.

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