Capital Gains Tax on property

Everyone involved in residential property right now, said Bill Rawson, Chairman of Rawson Properties, has become uneasily aware of the frustration and resentment among people in the lower income levels caused by homeownership being beyond their reach - despite repeated promises from the state that delivery here would speed up.

“Below the R500,000 level,” said Rawson, “seven out of ten homes now have more than one family living in them. Is it any wonder that anger is building up?”

One solution to the problem, said Rawson, could be to use a portion of the “fairly substantial” sums that are raised each year in Capital Gains Taxes on property to subsidise mortgage bond repayments by first time home buyers of new homes. The proviso, however, he said, should be that the homes cost less than R1 million.

“Depending on how seriously such a scheme was taken up,” said Rawson, “this could make homes available to that very large section of the population who are currently excluded from ownership. Furthermore, by bringing more previously disadvantaged people into established urban areas the normalization of suburban populations, which so many left wing people want, would become a reality.”

Rawson emphasized that his proposal stipulates that the assistance should be available only for new homes. If this is done, he said, it could overnight lead to a massive revival of development in the low cost housing sector of the type that the state has always tried to encourage. This, in turn, would create considerable employment as house building is one of the most labour intensive activities. It would also give the economy a much-needed boost and encourage the banks to lend more money into this very needy sector.

Asked how he sees such a proposal working, Rawson said that the simplest way would probably be to deduct a portion - or all - of the mortgage interest rate repayments from the new home buyer’s personal tax for a specified period.

After, perhaps, five years the buyer could be allowed to sell the property and upgrade - or move to another home, possibly getting further financial assistance on a lower scale. The scheme might even be extended to second and third properties, provided that these were retained by the person assisted to provide revenue for their retirement. Checks and balances would have to be implemented to see that the scheme was not misused.

Asked if this is not an awkward time to be suggesting that the South African Reserve Services take a cut in their income, Rawson said that what the state treasury lost in Capital Gains Tax would be more than compensated for by the improvement in the economy.

“As I see it,” he said, “South Africa is becoming increasingly socialist and pressure from the left will force the government to improve the quality and delivery of housing services. This is all to the good, but we have to recognize that it will cost money.

“Taxes are, therefore, likely to rise - and taxpayers will no doubt try to find ways of avoiding these - but the improvement in living conditions and social stability coupled to a reduction in crime would surely make this a worthwhile step to take, especially as, as I have indicated, I think massive low cost building would kick-start a genuine revival in the economy.”

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