Human Rights Day is celebrated annually in South Africa on 21st March, and is arguably one of the country’s most important public holidays. The commemoration of this day serves as a reminder to all citizens of the country’s struggle for democracy, and the sacrifices that were made on everyone’s behalf to attain the basic rights of dignity, equality and freedom.

As well as being a remembrance of the suffering that was endured in the days of apartheid, this national day is also a celebration of the rights that everyone living in the RSA now enjoys (and often takes for granted).

One of the most notable celebrations is the Cape Town Festival, which aims to promote tolerance and understanding of diversity through performances, workshops and various artistic endeavours. While other events around the country are designed to draw attention to current human rights concerns, such as racism and police brutality.

A bit of background

Back on 21st March 1960, thousands of unarmed South Africans gathered in a township called Sharpeville to peacefully protest against the atrocious apartheid government and its pass laws, which required indigenous adults to carry a passbook with them everywhere (this allowed the regime to control travel and dictate the duration for which black South Africans could stay in white areas).

However, as the crowd grew in size, tensions increased along with the police presence. 150 armed reinforcements and four armoured personnel carriers arrived, and the police eventually opened fire on the crowd, murdering 69 people and injuring 180 more.

This massacre became a turning point in the struggle for human rights in South Africa, which finally came to a head on 27th April 1994 when Nelson Mandela was elected as president. Shortly after his election, Tata Madiba announced 21st March to be Human Rights Day, in order to pay tribute to the people who fought for the freedom of all South Africans.

Know your rights

The South African Constitution protects the human rights of all its citizens. These rights were previously denied to the overwhelming majority of the population, and Human Rights Day thus serves as an important reminder to us all to reinforce our commitment to the Bill of Rights that is specified in the Constitution.

These hard-earned rights stipulate that everyone is equal before the law and thus has the right to equal protection and benefit of the law. The bill also includes the right for inherent human dignity to be respected and protected; the right to freedom of movement and residence anywhere in the country; the right to participate in the cultural life of choice; and the right to peaceful protest.

Financial rights?

Likewise, being financially secure and having access to a certain standard of living is also an important goal that all South Africans should strive for. Knowing how to make your money work for you can greatly relieve stress, as well as improve the quality of your life and afford you the freedom of choice.

Protections and benefits come in different forms, and there are ways to make the most of your earnings so that you can live comfortably and look after your family — even after you’ve gone. The key is to be aware of your entitlements, so that you can maximise your benefits and ensure you are protected in the event of any unforeseen circumstances.

The battle against the oppression of apartheid may have been won, but we still need to fight for the right to financial security. Don’t hesitate to arrange a meeting if you wish to discuss any legislative rights that could help to improve your financial situation.

Being unable to temporarily – or permanently – work as a result of a serious illness or injury can put a serious strain on your financial well-being. In this day and age, an income protection policy can, therefore, prove vital, as it ensures that you will receive tax-free monthly payments if you ever cannot work. Basically, income protection (sometimes called ICB – Income Continuation Benefit) is designed to replace lost income, so that you can maintain the same lifestyle that you enjoyed whilst working.

Whether you’re self-employed or formally employed, protecting your earnings should be considered a critical component of your financial planning portfolio. An income protection policy will help you to remain financially secure, no matter what unforeseeable life event occurs.

It essentially offers the peace of mind that you will always be able to meet your financial obligations and take care of your family, especially given as many employee-sponsored schemes will not provide sufficient cover.

What are the benefits?

Income protection benefits can replace income, service debt and monthly obligations (thereby indirectly protecting your credit rating), provide cover until retirement, and protect you in the event of permanent and temporary disability. As opposed to the traditionally-preferred lump sum disability benefit, income protection benefits are notably easier to claim, involve shorter waiting periods, and allow you to make multiple claims.

As income can be inflation-proofed, one of the benefits of income protection is that it will allow you to maintain your standard of living, rather than need to adjust it to fit a lump sum.

What’s best for you?

Although income protection is often argued as a more desirable option than lump sum disability cover, ultimately these policies are designed to meet different requirements. It is advisable to never rely solely on a lump sum disability benefit to cover an income need, but we may feel that a suitable scenario for you is a combined approach. This should always be discussed, in person, in a proper planning meeting where your full lifestyle financial plan can add valuable context to this decision.

It is also worth noting that any changes in tax legislation may require adjustments, so be sure that you stay informed and understand any implementations that could affect your payments and benefits.

Income benefits have come a long way since the days when only 75% of a client’s income would be covered if they couldn’t work. Recent additional product benefits can include holistic protection against several eventualities that could threaten your earnings, such as family responsibilities and retrenchment.

It is important that your income protection meets your specific needs at a premium that you can afford (while also not placing you at risk of being under-insured), so don’t hesitate to arrange a meeting to discuss your options and ensure you understand the claims criteria. Remember, nothing on our website constitutes actual financial advice, but is aimed to bring context and supporting information to the fore.

Arguably, one of the best things about spring in South Africa — apart from the pleasant weather and the abundance of Easter eggs — is the public holidays!

Many people in South Africa work very hard. Legislation regarding the Basic Conditions of Employment dictate that employees are entitled to 21 consecutive days of annual paid leave, which equates to only 15 working days per year if you work a five-day week, and 18 working days per year if you work a six-day week.

Unfortunately, this isn’t very much compared to many other countries. You may be interested to know that most employees who work a five-day week in England are entitled to at least 28 days of paid annual leave per year, which is equivalent to 5.6 weeks of holiday. However, there’s no use crying over our lot, and there’s not always much we can do about South African legislation. We simply need to make the most of our entitlements, and we can start by being savvy when it comes to how and when we take our leave.

17 DAYS FOR 8
The good news is that there are more public holidays in South Africa than many other countries. And the steady flow of national days in March, April and May make for the perfect excuse to unplug and step away from the daily grind. Already a quarter of the way through the year, you’re in luck if you feel in need of a long break because you can start getting ready for a 17-day holiday that will only use up about half of the basic annual leave.

With a bit of forward thinking, you can really make the most of the sunshine and public holidays at the start of spring. Combined with weekends, Human Rights Day on Wednesday, 21st March, Good Friday on Friday, 30th March and Family Day on Monday, 2nd April mean that if you leave on the evening of Friday, 16th March and return on the evening of Monday, 2nd April, you can turn on your Out-of-Office for 17 glorious days, whilst only needing to apply for eight days of leave. You can start back fresh at work on the morning of Tuesday, 3rd April, with a contented grin on your face, knowing you’ve managed your time and entitlements well.

10 DAYS FOR 4
Don’t despair if you have children and need to fit in with school holidays, as you can still get a good run by going away on the evening of Thursday, 29th March and returning to work on Monday, 9th April. This will make use of Good Friday and Family Day, giving you a 10-day holiday, while only needing to take four days off from work.

5 DAYS FOR 1
And if that weren’t enough, you can also make the most of a lovely long weekend at the end of April — perhaps this could be spent as a romantic couple’s break that would give you and your loved one the chance to spend some quality time together. This year, Friday, 27th April is Freedom Day and Tuesday, 1st May is Worker’s Day, so if you take the initiative to book Monday, 30th April off work, you can kick back and enjoy a five-day break, while only needing to use one day of annual leave.

If you use the time wisely, you stand to get 22 days off work in March and April for just 9 days of annual leave! Once you’ve had the nod of approval, all that remains is to decide where you want to go – or if you even want to go anywhere. Although it is possible to find some great last-minute deals, you could stand to save money and precious holiday time if you make a few preparations and bookings beforehand. So pack your slops and start planning!

(Article ideas from all4women.co.za and iol.co.za)

South Africa is currently in the midst of what is widely referred to as a ‘retirement crisis’, which could intensify if the issue isn’t addressed properly soon. After a period of excellent investment returns that have, up until recently, somewhat masked the fact that retirees in living annuities haven’t saved enough, local retirement fund members have now entered a lower-return environment, which will only exacerbate the problem.

Only a small percentage of the population is believed to be in a position to maintain their standard of living in retirement. And, according to a survey conducted in late 2016, approximately 30% of working South Africans have no formal retirement provision whatsoever.

Early withdrawals of retirement savings are considered to be one of the main reasons for this dire situation. And a variety of economic factors may be responsible for this concerning attitude to withdrawals.

Notably, disposable income has come under pressure in recent years, which has resulted in many people falling into debt or struggling to meet their daily needs. Many citizens earn less than R5,000 a month and are in survival mode, and a lack of financial literacy is also arguably an issue, as many people don’t understand the benefits of compound interest, or don’t realise the impact that early withdrawals could have on their future.

Roughly a quarter of the population also doesn’t believe that they will even reach retirement age, and recent changes to the Taxation Laws Amendment Act have caused some people to fear that the government could take their retirement money.

The process of retirement reform is slowly taking its course in South Africa, and compulsory annuitisation in the provident fund space is potentially on the cards. However, as South Africa doesn’t have the option of being bailed out by the fiscus, it is more important than ever that all citizens prepare for their retirement and plan how best to achieve their financial goals.

Here are 5 tips that could help you to avoid being part of this ‘retirement crisis’.

1. If you change jobs, don’t just cash in your retirement savings. And even if you quit the 9-to-5 grind, consider not completely exiting the workforce. Part-time work that you enjoy may still bring in a significant sum per month, and will reduce how much you need to dip into your savings.
2. Don’t underestimate how long you may live. Due to the prevalence of HIV/AIDS, South Africa may tragically have the lowest life expectancy in the world, but the US Census Bureau has noted a change in prospects for the country. By 2050, the population of people over the age of 65 is expected to jump to 5.6 million, up from the 3.1 million that it was in 2015.
3. Factor in healthcare costs. Medical costs will undoubtedly rise each year, so be sure that you have appropriate medical aid, as well as enough savings to pay for any expenses that aren’t covered.
4. Don’t ignore major expenses that could affect your monthly budget. These could include foreseeable events, such as helping your children to pay for university fees, but could also include less predictable occurrences, such as needing to fix a car or fly abroad for a wedding.
5. Simplify your finances. If you have multiple savings accounts, it may be worth consolidating them so that you have a better idea of your overall asset allocation and can avoid any overlaps. You may also benefit from a revised fee structure or enhanced compound interest.

The retirement crisis doesn’t have to directly affect you, so long as you take some simple steps now to prepare in advance for your future. Don’t hesitate to arrange a meeting to discuss the best ways to ensure you will have enough savings to sustain you throughout what will hopefully be a long and happy retirement.

Original source:

aarp – Achieve retirement planning financial goals

moneyweb – retirement crisis could get worse

Retirement Annuities (RAs) have been around for a long time, and are basically private pension plans that help you to save for retirement. As we near the end of yet another tax year, we move into a period that is often referred to as RA season, which is a good time to weigh up the advantages of this investment product.

Over the years, RAs have evolved into much more flexible and affordable investment vehicles than they once were, and investors can now benefit from “new-generation” RAs on linked investments platforms (LISPs). These offer a vast selection of underlying unit trusts, and they allow contributions to be made at the investor’s discretion, without penalties for missed contributions.

The most significant benefit of having a retirement annuity is the tax deductibility of contributions. According to an article published on Fin24, as of 1st March 2016, “all contributions to pension, provident and RA funds are consolidated and are deductible up to 27.5% of the greater of remuneration or taxable income, capped to R350,000 annually.” An investor can expect to receive an annual tax refund in line with their income, and this RA rebate can considerably boost your retirement benefit.

Capital gains tax normally needs to be paid for any discretionary investment, but this isn’t the case with an RA. Interest and dividends are also not taxed in an RA, which means that the entire growth of your investment is tax-free, which makes a significant difference over the long-term.

Do be aware that when you do finally retire after the age of 55 and are finally allowed to take up to one third of your RA in cash, you will have to pay tax on the proceeds taken. However, a portion of the lump-sum benefit is tax-free and the rest is taxed on a sliding scale. And, as you have deferred paying tax on the proceeds, a larger investment amount has had the chance to compound tax-free over time.

Come retirement, the other two thirds of the proceeds from your RA will be used to purchase an annuity, which will then provide you with an income to sustain you in your golden years. You will need to pay tax on your monthly “income”, but many individuals’ personal tax rates decrease after they retire.

An RA presents another advantage when it comes to estate planning, as it falls outside of your estate, so the proceeds from your RA will be paid directly to your nominated beneficiaries when you pass away, without the estate duty or executor’s fees. For the most part, your money is also protected from the claims of creditors, which is another yay for RAs.

In spite of this list of positives, many investors feel uneasy when it comes to retirement annuities and are reluctant to consider them as an investment option. However, it’s important to understand that RAs have evolved significantly, become much more affordable, and new regulations have been implemented to minimise risk and force investors to diversify. This may not be considered as a positive thing by everyone, as Regulation 28 of the Pension Funds Act does restrict investors to a maximum of 75% allocation in shares, which many people debate as shares have managed to outperform all other asset classes over the long-term. However, this risk management method was implemented to benefit broad spectrum investors in different environments, and it offers more investment protection when markets become volatile.

If your objective is to specifically save for retirement, a retirement annuity could be the best vehicle for you. So don’t hesitate to arrange a meeting this RA season to discuss your options and goals.

Original source:

fin24 – take advantage of RA season

fin24 – does the taxman help you save for retirement

fin24 – regulation 28 and the growth of your RA

fin24 – new retirement fund rules to better protect consumers

taxtim – How SARS new changes affect you

Towards the end of 2017, President Zuma instructed South Africa’s minister of finance, Malusi Gigaba, to resolve economic challenges after Standard & Poor’s lowered both the country’s long-term foreign and local currency debt ratings by one notch on Friday, 24th November.

A statement was released about the measures that would need to be taken to trim expenses and increase revenue in order to address the R40-billion deficit identified by the ratings agency and October’s Medium-Term Budget Policy Statement (MTBPS). And an article published by BusinessTech explains that “this would equate to cuts in expenditure amounting to about R25 billion, as well as revenue-enhancing measures amounting to about R15 billion, including, where appropriate, tax measures.”

According to a report by BusinessDay, “Treasury has since confirmed that these amounts were over and above the R15-billion in tax measures and R31-billion in spending cuts for the 2018-19 fiscal year already included in former Finance Minister Pravin Gordhan’s budget in February.” Earlier in the year, Gordhan announced hard-hitting increases in personal income tax for 2017-18, which included a new top personal income tax rate of 45% for the estimated 100,000 individuals who have taxable incomes above R1.5 million.

The government is now looking to implement a total of R30-billion in tax hikes and more than R50-billion of spending cuts in 2018 to cover the economic shortfall with which they are faced. However, following the recent MTBPS, a number of analysts have noted a growing concern that South Africa has already reached its limit in terms of the amount of revenue that it can extract from taxpayers through further tax increases. Kyle Mandy, tax policy leader at PwC, highlights that “the last few years have seen significant tax increases directed at fiscal consolidation in a low growth environment and amid growing concerns of levels of corruption and government inefficiency.”

In addition to tax hikes, massive budget cuts are allegedly on the horizon, which are reported to include cutting social grant payments and reducing the rollout of RDP houses. There are also potential plans to generate more revenue by increasing VAT.

As the government struggles to rectify the increasing public-debt ratio, and appeal to investors and ratings agencies, it’s important to ensure that you stay well-informed about the situation and are financially prepared to make any additional contributions required. Don’t hesitate to arrange a meeting if you would like to discuss any increases that may affect you.

Original source:

business tech – South Africa looking at R30 billion tax hike for 2018

business tech – Zuma considers tax increases and spending cuts following ratings downgrades

business live – budget in a nutshell tax hikes hit south africans pockets hard

Many South Africans have started taking advantage of Tax Free Savings Accounts (TFSAs), which were established by the government as an easy and safe way for citizens to increase their savings. When investing in a TFSA, you won’t be taxed on any growth on your investment — you won’t pay tax on dividends, interest or capital gains tax. And when you consider that the interest offered in a traditional savings account is usually less than the inflation rate, it’s no wonder that TFSAs are widely considered to be beneficial savings vehicles.

[DISCLAIMER: This article is not an endorsement of TFSAs over other long term vehicles as every portfolio is unique and may require different investment products. Let’s chat first before making any final decisions.]

Since March 2015, South Africans have been entitled to invest up to R30,000 a year (or R2,500 a month) in a tax-free investment, and contributions are capped at a lifetime maximum of R500,000. While they do obviously have tax benefits, the main goal of a TFSA is to encourage people to save, and R2,500 a month is thought to represent a realistic target.

Many experts believe that any South African with taxable income should take advantage of this investment option (no matter how little or how much money they have to invest), as this ‘mini tax haven’ will dilute their overall tax rate over their lifetime. If investors invest the maximum amount allowed, they will reach the limit in just under 17 years, which means that they will have R500,000 — plus capital growth, dividends and interest — as a tax-free investment. And once they have reached the R500,000 cap, it’s simply a question of watching money grow with the power of compound interest.

However, there are times when a TFSA may not be an appropriate investment tool. Some experts believe that the term tax-free savings “account” has led many people to opt for cash deposits instead of other investments, which could offer better growth opportunities and even lower costs. A TFSA may help you to avoid tax on interest, but investors could see greater capital growth with other savings products.

Although you will save on tax on the growth of your investment, plus you won’t be charged performance fees, a TFSA still has fees and transaction costs that should be considered. It’s also not advisable to go above the annual R30,000 limit, which applies to the combined annual payments of all your approved tax-free savings accounts. If you do, there will be tax penalties — any contributions made in excess of these limits will be taxed at a rate of 40% of the total amount exceeding the limits. Furthermore, you need to be careful not to donate more than R100,000 a year to children or grandchildren, or you will be liable for donations tax.

Paul Leonard, regional head of Citadel, highlights in an article published on Fin24 that tax-free savings accounts “should not be viewed as a one-size-fits-all solution.” TFSAs are not intended for short-term savings. As with any investment vehicle, they are designed for a specific purpose and are best suited to the lower taxpayer who only needs access to an investment in the medium- or long-term. According to Leonard, “you would only benefit meaningfully from the tax-free treatment of money in the TFSA once the value of the investment is sufficient to exceed the annual interest exemption and capital gains exclusion.”

When it comes to saving for retirement, a TFSA could suit you if your income is below the income tax threshold; or if you are uncertain about your job security and may need to access the capital in the case of unemployment; or if you are considering emigrating and may wish to expatriate your capital. It is also appropriate for topping up retirement savings that are over the maximum annual amount on which South Africans can receive tax breaks. However, it is generally recommended that investors first make use of all the tax breaks available for retirement funding investments, then use a TFSA as a complementary tool.

Tax-free investments do have some restrictions that don’t apply to retirement annuities (RAs). For example, if you make a withdrawal, you can’t simply replace it another year in addition to the annual limit. However, compared to RAs, tax-free investments offer flexibility in that you have access to the funds without early withdrawal penalties, so you don’t have to wait until retirement before they are available. And a big bonus of a TFSA is that, not only are your contributions not tax deductible, but you also won’t have to pay tax on any of the proceeds when you access the funds (unlike with an RA).

In conclusion, a TFSA allows you to save without incurring any tax on the growth of your investment and, in order to grow your portfolio, it can be worth making the most of all tax-free benefits available. A TFSA can be a great way to supplement retirement savings or achieve other long-term savings objectives, and it can also provide flexibility if you need funds in an emergency.
However, everyone has their own unique set of circumstances that need to be considered when deciding how to save for retirement. It is, therefore, always worth seeking professional advice and carefully scrutinising any investment to see if it’s your best option. So don’t hesitate to arrange a meeting if you wish to discuss whether a TFSA could help you to achieve your personal financial goals.

Original source:

fin24 – when not to use a tax free savings account

fin24 – how to choose a tax free savings product

fin24 – does the taxman help you save for retirement

Can you remember what resolutions you made last January? Or for how long you kept them?

The trouble with resolutions is that they’re often made half-heartedly, in an annual acknowledgment of our inadequacies and a cursory attempt at self-improvement. Once the hazy days of the holiday season are over and we are faced with the realities of day-to-day life, even the most well-intentioned of us tend to succumb to temptations or old habits far quicker than we would hope.

Our optimistic resolutions soon turn into unrealistic pressures, and our vows to hit the gym every day, or to remove sugar from our diet, don’t seem very pleasant or plausible for long. Having recently read this refreshing article on practical ways ways to make and keep resolutions – perhaps we can turn the tide on ruined resolutions!

The reason why most people don’t manage to stick resolutely to their resolutions isn’t so much a question of intention or desire. People don’t want to set themselves up to fail, but that is what we ultimately often end up doing when we don’t set realistic goals. Although we may be taught that we should reach for the moon, overstretching tends to result in us falling flat on our face, rather than landing among the stars.

The start of a new year is a great opportunity to sweep away the cobwebs and draw back the curtains to start afresh. So, if you would actually like to keep a new year’s resolution, then make it an attainable one. Acknowledge your shortcomings and set yourself up for success in 2018 by giving yourself a goal that you can easily achieve.

If you want to improve your financial well-being, start by working some small steps into your routine. These can include buying less coffee; carrying a reusable water bottle, walking to places instead of driving or taking Ubers; and increasing your monthly savings or debt repayments by a feasible sum that you’ll barely notice (particularly if you automate the amount).

Write a list of things that you would like to accomplish and a simple way in which each can be done. For example, if you wish to contribute R3,600 more per year to your retirement fund, then you may be able to achieve this by foregoing one monthly meal in a restaurant or halving your weekly cappuccino consumption.

Then sleep on it and choose one or two resolutions, rather than trying to attempt everything on the list. Furthermore, give yourself a manageable timeframe — such as three months, instead of 365 days — and commit to following through for that specific amount of time. Once you succeed, you can then decide to commit to another short period. Additionally, set yourself quantifiable targets instead of vague goals that involve actions like ‘cutting down’ or ‘buying less’. For example, if you currently buy five coffees a week, decide to buy only two a week and make the rest at home.

Attaining a financial goal in 2018 doesn’t have to be stressful if you set yourself fun-size resolutions and break the year up into bite-size pieces. The important thing is to work on improving an aspect of your life for the sake of your future. And what better month to start than January?

Original source

It’s easy for Christmas to turn into a frenzied flurry of wasteful consumerism, and to find ourselves knee-deep in ripped-up wrapping paper that we discard in a hurry before Christmas lunch. But before you fill black bin bags with gift tags and empty jars of cranberry sauce, pause for a second to think about how you could help the environment this festive period.

According to a report compiled by the World Bank in 2016, South Africa produced 54,425 tonnes of rubbish every day, which was the 15th highest rate in the world. And each household produced two kilogrammes every day, placing South Africa at number 38 in the global waste rankings on a per capita basis. As you can imagine, this amount increases significantly over the silly season, when most citizens tend to purchase (and throw away) even more than usual.

The amount of municipal solid waste is growing fast and, alarmingly, the World Bank’s data showed that only 1% of all waste in the world gets recycled — with the bulk (59%) ending up in landfills or being dumped (33%). With these statistics in mind, try to enjoy a Christmas of consciousness, rather than consumerism. It’s easy to minimise waste and cut costs this holiday if you just follow these five simple steps for starters.

1. Recycle
Cut down on waste by buying less and recycling more. Can you imagine how much of Kruger would be covered if everyone in South Africa laid out all the used wrapping paper on the ground? Luckily, it’s very easy to recycle, as is cardboard from packets of stuffing and empty toy boxes.

Take empty glass jars of mincemeat, pickles and cranberry sauce to the bottle bank, and recycle empty tins of biscuits and sweets. Even the foil from mince pies is recyclable, and don’t forget those empty plastic bottles of cleaning products once you’ve wiped up the gravy!

If you have bought a real Christmas tree, be sure to recycle it, so that it can be shredded and used as compost, which will help next year’s trees to grow. It can even be used as chipping to cover pathways.

2. Reuse
Christmas cards don’t have to be thrown away after the holidays. Instead, you can cut them up and make new cards or gift tags out of them. This will make you extra prepared for next Christmas and save a few Rand, as well as the environment!

And instead of wrapping presents, consider giving them in pretty gift bags. That way you can reuse them again next year and save on paper!

3. Donate
Some relatives are renowned for giving presents that you will never use in a million years. If this is the case, or if you’re given something that doesn’t fit, just smile sweetly and pass it on to someone in need who will appreciate it. There are lots of charities in South Africa that will distribute unwanted goods to those less fortunate, and one man’s junk is another man’s treasure.

4. Compost
It’s estimated that, as a global community, we throw out over 7 million tonnes of food every year. So, if you can’t get creative with the leftover turkey, or once you’ve had your fill of roast veg, throw all the tidbits and peelings in a compost bin. If you don’t have one in your garden, then there are plenty of small holdings that would be grateful for the extra compost ingredients.

5. Plant a tree
Instead of decorating a plastic tree or cutting down a real one, consider buying a living “Christmas tree” with roots. This doesn’t have to be a traditional fir, as plenty of trees or plants make for a great substitute that can be decorated with as many baubles and as much tinsel as you please. The best part is that it will continue to grow year after year, so that you’ll derive a lifetime of pleasure from it, instead of simply discarding it after a few weeks.

Original source:

theguardian.com

bbc.co.uk

Saturday, 16th December is an important day in the South African calendar as it marks the Day of Reconciliation. The significance dates back to two events in history. The first of these was in 1838, when the Battle of Blood River took place, and 470 Voortrekkers (who had the advantage of gunpowder) defeated the 10,000-strong Zulu army. This was after the Zulu chief, Dingane, misunderstood the Voortrekker leader, Piet Retief’s, intentions to negotiate, so murdered him and his party. This Voortrekker victory was then commemorated as the Day of the Vow.

The second historical event that took place on this date was in 1961 when the military wing of the African National Congress (ANC) — Umkhonto we Sizwe (MK) — was formed to fight the Apartheid government, when it had become clear that passive resistance was no longer an option. Its formation has been commemorated every year since 1961.

However, this date was only first celebrated as a public holiday in South Africa on 16th December 1995, when it was renamed as the Day of Reconciliation. This was done as an endeavour by the country’s first democratic government to promote reconciliation and national unity by acknowledging the importance of this date to both the Afrikaners and the liberation struggle.

According to an article published in The Conversation, the South African government that ruled from 1994-1999 can largely be credited with trying to foster unity, heal wounds, and make attempts at socio-economic development. However, this 16th December, it has become clear that a great deal of damage has been caused by South Africa’s current administration led by President Jacob Zuma. Amidst state capture allegations, the country is now in recession, has been downgraded to junk status by credit agencies, and the corruption at the root of these issues has scared off many investors and eroded any trust in government.

It is clear that South Africa is in desperate need of a government that promotes national unity and healing again.

National healing will indeed require sacrifices from all South Africans to ensure a better future, and the possibility of a wealth tax has been raised as one of the ways citizens could contribute to the interests of the whole country. However, this only stands a chance of working if the money would be put to good use and not wasted through corruption and inefficiency.

A document published by the Davis Tax Committee highlights that “the distribution of wealth in South Africa is highly unequal… It is well established that economic inequality inhibits economic growth and undermines social, economic and political stability.”

South Africa currently has three forms of wealth taxation — estate duty, transfer duty and donations tax, which combined bring in about 1% of tax revenue. However, discussions are now focused on the desirability and feasibility of the following three possible forms of wealth tax — land tax, a national tax on the value of property (over and above municipal rates), and an annual wealth tax.

The article in The Conversation argues that “a wealth tax could play an important role in national healing if it was implemented with the necessary circumspection.” Likewise, an article published on Fin24 highlighted how “Judge Dennis Davis, who heads South Africa’s committee on tax reform, said that he supported a wealth tax as it was an important symbolic step to address inequality, even though it would raise a relatively small amount of revenue to plug the country’s widening budget deficit. He acknowledged that the controversy around corruption and state capture make this an awkward moment to take the step, but added that he could not allow “vast swathes of wealth to be immune to tax”.”

Although his remarks indicate that a wealth tax may soon be on the cards, there is still a lot of debate surrounding the issue and many arguments against it. Notably, it is argued that there are only 7.4 million taxpayers in South Africa who have already been squeezed so much, and many fear it would spur wealth creators to leave the country, which would further weaken the currency and fan inflation. It has also been argued that the introduction of a wealth tax wouldn’t actually address the structural problems that are responsible for the high rates of unemployment and poverty.

Although advocates support their beliefs with examples of economies such as Switzerland, where it has been a success, Fatima Vawda, the Managing Director of 27four Investment Managers, ascertains in an article published by the Daily Maverick, that the strategy has largely been a disaster in many economies where it has been tried.

Vawda also believes that we should rather broaden ownership of capital to ensure broad-based prosperity by using “pragmatic strategies that are aimed at maximising tax revenue… Imposing a wealth tax in a bid to stimulate prosperity should be the last resort.”

The tax committee’s call for public comment on the introduction of a potential wealth tax may have closed, but public hearings are likely to take place. This tax may not ever come to fruition, but it’s important to stay informed and prepare for eventualities in advance. If you are interested in discussing your thoughts on the matter, or learning more about how this development could potentially affect your financial situation, then don’t hesitate to arrange a meeting.

Original source:

theconversation.com

taxcom.org.za

dailymaverick.co.za

fin24.com