Worried about Tax increases?

Tax increases will only get worse 

The most recent 8%-12% tax increase proposal has many taxes paying South Africans worried about the future of their earnings and how the proposed tax increase will affect them. According to the proposal made by the social development minister, Lindiwe Zulu, every tax-paying South African citizen will have to pay an additional tax of up to R2,800 per month to contribute towards the ‘social security fund.’

The world has been through a cash-printing cycle like never before

It is important to remember that an extensive fiscal stimulus run, such as the most recent in response to the COVID-19 pandemic, must have some future cost attached to it, if it is not in our lifetime, it will be in our children’s lifetime.

There are two avenues a country can utilize to generate excess funds in order to meet debt repayment requirements and to fund the state-owned enterprises that are meant to service the country. The first is to reduce expenses in order to have more funds available from current revenue streams. Given the history of corruption within the South African government and its state-owned enterprises, the first option is not entirely feasible as most of these enterprises are in dire need of more funds and new management just to keep head above water.

The second option, which has been the most utilized option in modern South African history, is to increase taxes so that the revenue collected by the state increases to service the above-mentioned debt and funding requirements. The most recent tax increase proposal will be the first of many to come, whether it be in direct or indirect taxes.

Taxes will increase, where it goes is the problem.

The financial condition of the South African economy has become increasingly concerning as the economy is now at a point where they are not able to invest in the infrastructure required for future economic growth.

Tax increases is still a very useful tool to achieve the country’s economic growth targets. However, South Africa’s corruptive nature has led to the unequal distribution of tax revenue generated for the most part of the country’s modern history. The new round of tax increases must go towards the improvement of our infrastructure, investment in our youth and education as well as various other socio-economic areas that requires it the most.

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Caveat Capital Management is a strategic advisory firm based in Cape Town. Caveat Capital Management specializes in structuring tailor-made investment portfolios that serve your needs now and grow with you as your needs change. Caveat works to maximize your gains and minimize the risk.

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Caveat Capital Management has a competitive fee structure that incentivizes the portfolio manager to perform and the renumeration is highly linked to the performance of the portfolio. Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA). Meaning that we have the required licensing to structure full-discretionary portfolios structured to your needs.

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Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA).