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The property sales tax scheme announced in the budget is a case study on just how not to do things. It became immediately apparent to all that the scheme was ill-thought.
No form of prior consultation with the technical people took place. In short, someone had not done his homework.
The scheme is yet another example of how this government is looking for quick revenue earnings with little care or attention to the effects on disposable income and employment. To target the building industry which remains buoyant and one of the only industries doing well is diabolical.
To upset the market in such a draconian manner is criminal.
Our economy simply cannot absorb further shocks. Government still needs to appreciate that the way forward is through planning, consultation, dialogue building, trust and consensus.
The professional approach would have been to have consulted, not individuals with their own personal interests, if any were indeed consulted, but the constituted bodies and the respective associations involved in the property market.
They would have immediately informed government of the consequences, as indeed they did in the media the day after. In fairness, the prime minister in an interview with this paper just a few days after the budget showed a willingness to make changes. This would have avoided all the bad publicity and flak thrown government’s way by the estate agents. However it shows that the administration is unable to appreciate the implications of badly designed reforms. And it is highly counter productive to retreat with budget proposals it points to some serious ‘bad planning.’
The only remaining objection to the budget hinges on one fundamental point namely people selling property after the amended five-year period will be fiscally penalised as they will be paying a higher tax rate. The old fiscal regime of 35 per cent already high, risks, based on calculations of a 12 per cent withholding tax amounting to more tax being paid. This requires fine tuning early amendments and changes.
The favourable position regarding the fiscal changes in the case of inherited property should certainly lead to more properties being put on the market. This, in a normal market should result in a lowering of prices. This desired decline in prices can only help ease off all the economic and social pressures being experienced by young and low income earners. To this extent the measure is very positive. Ironically it will favour persons who have hoarded property for years. The amendments took place specifically to free up hoarded property. An incentive to do so was introduced since people who have had property for a long time are going to enjoy an advantage. This sounds fine but it bears mentioning that it goes against the trend of foreign fiscal regimes where work is rewarded and hoarding is penalised!
The introduction of fiscal receipts to cover bank loans is an extremely clever way of getting realistic tax declarations from small tradesmen providing services in private houses and offices. For far too long many self-employed such as small contractors, tilers, electricians and plumbers have simply operated outside the taxation system. Too many have simply moonlighted and too few complete realistic income tax declarations. This budget announcement may lessen if not put an end to this practice. We hope that this introduction is not yet another pious hope which ends up being ignored by the banks. It is the responsibility of government to ensure that all persons providing a service are registered and regulated.
The fallout following the announcing this budget measure should make government realise the importance of doing ones homework.
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