Matthew Lester unpacks wealth taxes in light of the Budget Speech
04 March 2015
Posted by: Author: Matthew Lester
Author: Matthew Lester (Biznews)
The problem with the National Budget Speech is that all the pundits are so hell-bent on being first to market with the news that we miss the more subtle stuff.
There are different forms of tax. Broadly speaking there are transaction/ consumption taxes, income taxes and wealth taxes.
Capital Gains Tax ‘CGT’ is often viewed as a wealth tax. But it isn’t. Actually it is an income tax on capital gains.
Now, if there had been an announcement of a wealth tax in the national budget speech everyone would have freaked out. But estate duty and donations tax rates and thresholds remained constant.
Not much was made of the change to the transfer duty table.
But what is transfer duty? It’s not a transaction/consumption tax. And it sure as nuts isn’t and income tax. Technically it’s a wealth tax paid when you buy a used home. New homes are subject to VAT (as hopefully there is some value added).
The budget review 2015 reflects that the net effect of the change to the transfer duty table will only be R100 million.
But hang on! There has been a generous increase in the transfer duty thresholds up to R1,75 million. But then a new threshold has been included for transactions above R2,25 million and above.
So transfer duty on a R5million home has increased from R317 000 to R387 500. And on a R10 million home from R745 000 to R937 500.
One can argue that if a taxpayer has R10 million then an extra R192 500 should not break the bank. But the fact is that wealth tax has increased.
Donations Tax and estate duty are regarded as wealth taxes and amount to 0,1% of total taxes. But if transfer duty is included wealth taxes will now account to 0,7% of total taxes. That’s not to far off the 1% of total taxes that some consider advisable.
This article first appeared on biznews.com.