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South African Savings Slump Blamed On High Taxes

by Robert Lee, Tax-News.com, London

30 October 2001


According to South African tax experts, the country's savings rate, which accounts for just 15% of gross domestic product (GDP), is too low to support economic growth, a fact which has been blamed on high taxation rates on savings interest and investment gains.

There has been heavy criticism of the government's attitude towards savings and investments, and although the decision to introduce capital gains tax caused outrage among the country's investors, the recent move towards taxing gains made on foreign exchange fluctuations looks as if it may just be the last straw.

Former Reserve Bank governor, Chris Stals, argued recently that it is unfair that the government, which has taken on the obligation to protect the value of the rand, can take advantage of its failure so to do by attempting to extract more taxes from beleaguered investors and savers. This, he suggested, may be part of the reason for the continued weakness of the rand.


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