PROPERTY: Heavy Tax Burden is Squashing Home Dreams
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Individuals in SA are paying way too much tax - and it is time to ease
that load or the economy, and the housing market, will continue to
exhibit only sluggish growth.
“At the moment, personal income tax and VAT (which is mostly paid by individuals) account for more than 50% of SA’s total tax revenue,” notes Berry Everitt, MD of the Chas Everitt International property group.
“And that does not take into account all the other taxes that individuals pay regularly, such as fuel tax (about 28% of every litre purchased), municipal taxes and toll road fees, or big amounts that they pay less regularly, such as capital gains tax, estate duty or property transfer duty. These take their contribution to total tax revenue to around 60%, which in anyone’s terms means that they are carrying a very heavy tax burden.
“Then if you add this to the continually rising fuel and energy costs that affect every household, it is little wonder that SA has such a low savings rate – which in the property context translates directly into the inability to save for a deposit and to qualify for a home loan.”
What is needed, he says, is a major reduction in personal tax rates. “This would increase each household’s disposable income and result, in turn, in higher taxable incomes and profits for companies. It would also, most importantly, facilitate the creation of new jobs.
“It is well known that the easiest person to collect tax from is a person with a job, but the problem at the moment is that SA only has a tax base of around 5m people out of a total population of around 50m, and that they are becoming increasingly resistant to what they see as the unfairness of the system.
“So what government needs to do is take the plunge and lower taxes to create more jobs, so that the tax load can ultimately be spread more fairly among a greater number of individuals.”
Meanwhile on the property front, Everitt says, transfer duty needs to be looked at once again. “The current threshold at which transfer duty becomes payable is R500 000, but this is too low in the light of the average house price now being well over R700 000 – and in the light of the fact that most potential buyers now also need a large cash sum as a deposit in order to secure mortgage finance.
“Most people cannot afford both and home ownership is taking a back seat as a result. I would suggest that the threshold should now be raised to R750 000, or even R1m.”
Business News Sector Tags: Property|
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