“We always knew that this was a budget that was set to bring a higher tax burden, especially for the wealthy and tougher times for consumers on the whole as Treasury needed to find an extra R28bn in a shrinking economy”, says Samuel Seeff, chairman of the Seeff property group.
“Under the circumstances, we see Finance Minister, Pravin Gordhan’s budget as reasonable, save perhaps for concerns around the growing tax burden for the wealthy”, says Seeff. The minister’s more positive economic outlook is welcome news.
“Insofar as the property market is concerned, the raising of the threshold for transfer duty exemption from R750 000 to R900 000 effective from the 1st March is the most positive and welcome outcome. It will certainly enable more first time home buyers to get onto the property ladder”.
“That said, the cost of home ownership remains high with home owners burdened with rising property taxes, sectional title levies and ever-higher basic utility costs”.
“We are pleased that there has been no further hike in transfer duty for the higher price brackets as was the case last year”.
“That said, while the increase in taxation of the wealthy in the form of a new top marginal bracket (45% for annual earnings of R1.5m-plus) and higher dividend tax (up from 15% to 20%) may unfortunately be necessary, we are concerned at the growing burden at the top end”.
“Globally, we have seen that burdening wealthy citizens with higher tax does not create more government income, but tends to have the opposite effect. These are generally your entrepreneurs, business owners, captains of industry and job creators. Higher taxes is likely to see more wealth leaving the country”.
“It may potentially also take the liquidity out of the top end of the property market. As we have seen over the last year, the higher transfer duty and Capital Gains Tax impacted sales negatively. The negative sentiment also meant that despite a weak rand, fewer foreigners bought property despite the fact that we welcomed record numbers of foreign visitors over the summer”, says Seeff.
“Tax payers also need to see a government that is firmer on cutting corruption and wasteful expenditure. That surely may well alleviate the need for these tax hikes”, he adds. “We need a more positive outlook and economic growth. That will broaden the tax base and generate more income for government”.
“As we have said before, we need a good economy to kick-start the property market. Nonetheless, we remain upbeat that the market should hold up well for the time being. It continues to be business as usual and hopefully the higher exemption threshold will boost demand from first time buyers”.