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By Andrew Golding
Apart from the obligation to introduce the vaccination program urgently, the announcement in today’s state budget is that there will be no increase in income tax, but an adjustment of personal income by 5 percent. Offer R2 – for low and middle income households.
Another good news for companies is that the corporate tax rate for people with years of assessment will be reduced to 27 percent from April 1, 2022.
From a real estate perspective, what matters most is what the budget will do to remove barriers to economic growth and build business and consumer confidence.
Tax breaks for individuals and businesses will build confidence levels – especially since some commentators may have predicted significant tax increases.
The government’s continued commitment to fiscal consolidation should also be well received by rating agencies and investors.
Firstly, in this context, we welcome the prioritization of the establishment of a tourism equity fund to support the recovery of the tourism sector, which is a significant contributor to GDP and, along with the hospitality industry in general, has borne the brunt of the sustained Covid19 curfew.
We also look forward to stabilizing national debt and accelerating the implementation of overdue structural reforms aimed at stimulating investment in the economy to stimulate growth and create jobs. This is essentially the only sustainable long-term solution.
In turn, SMMEs will also appreciate initiatives to lower barriers to entry and lower business costs. Another positive result is the R4 billion allocation by the Ministry of Small Business Development for municipal and rural enterprises.
Investing in infrastructure improvements is important – a factor which in turn has a direct impact on the mood in the real estate market – and it is hoped that the R 791.2 billion that will be made available for infrastructure investments will not only be used quickly in the road sector , Bridges and dams, but especially the urgent need to get our country’s rail network back into operation.
Without effective transport networks, industry and private individuals as well as our economy are negatively affected.
Due to a recent hike in fuel prices, a further 27 cents per liter hike in fuel taxes will place an additional financial burden on the economy.
While the residential property market has recovered somewhat in recent months, consumers are still under economic pressure. It is hoped that government initiatives in the near future will help offset the ongoing economic impact of the Covid lockdown.
All in all, the budget is welcomed with tax breaks and further budget consolidation. This should help to stimulate economic growth.
Much of the progress made in stabilizing debt, however, depends on the upwardly revised growth projections.
As the Treasury Department itself notes, “the outlook remains highly uncertain and the economic impact of the pandemic is far-reaching”.
Dr. Andrew Golding, Managing Director of Pam Golding Property Group
* The views expressed here are not necessarily those of IOL. or for front pages