The Association of Unit Trusts and the Institute of Retirement Funds have
both objected to the proposed Capital Gains Tax (CGT) saying the tax will
undermine the savings base of South Africans.
Both organisations submitted objections to the SARS this week.
The Association of Unit Trusts says that the intention of SARS to level the
tax within the fund and not in the hands of the investor will create
unfairness. There are many different types of investors, including bodies
that will be excluded from CGT, which would become subject to the tax.
By taxing within funds, other funds, such as funds of funds, would become
victims of double taxation. Funds such as index funds, which change
investments to keep in line with a chosen index would also become liable
for the tax. Investors could be adversely affected by dates on which the
tax was paid.
The Institute of Retirement Funds says CGT will reduce pension benefits
adding to the burden of the state.
CGT will reduce incentives for companies to declare lower dividends and
retain profits for further capital development (STC), discouraging capital
investment, the institute says.
CGT will reduce the efficiency of the stock market by encouraging share
hoarding and consequent illiquidity and increase in the frequency of
pricing anomalies, it says.