GENERAL NEWS
From the MD’s desk
By Sandy Kelly
Last quarter we featured tax matters
and their effects on the property industry
and, in particular, the listed property
funds. Contrary to all advice from
experts such as accountants, bankers
and economists, the word is that the
proposed property transfer tax bill may
well be adopted by parliament.
This is where citizens will be subjected to 5% transfer duty and 30%
for non-citizens on a purchase of a property by transfer of title by way
of cession of lease, shares in a property owning company or of the
freehold title.
When a new law or an amendment of a law is passed, one has to
consider the reasons for this. In this case, is it to collect more tax (such
as an increase in the personal, company or VAT rate which is clearly the
intent) or as in the case here, we understand, to protect and empower
citizens and the country’s land ownership?
Considering that citizens’ rights are already protected in respect of tribal
leases and agricultural land, what will the effects be? Everybody, including
citizens will be adversely prejudiced, as the market forces which determine
the value of anything, in this case, property, is what the buyer is prepared
to pay and what he or she can afford. This is often governed by what the
bank will be prepared to lend, particularly in respect of property which is
the largest capital investment that one would make in one’s lifetime.
This, in effect, all means that if there is 30% tax on what one is prepared
to pay, or if it is 30% less than what the banks are prepared to finance, or
would result in 30% less to the seller or 30% less value to the ‘keeper’ investor.
So everyone’s value is 30% less! This is hardly in keeping with the
principle of property being one of the primary sources of wealth creation.
ie. Everyone’s wealth, citizens included, will be devalued by 30%. That’s
it! Instead of empowering citizens, it will have the opposite effect.
Furthermore, it will be a serious impediment to foreign investment. How
is this expected to attract investors when this law clearly discourages
them? Especially when we are crying out for foreign direct investment
and have a specific organisation set up - the Botswana Investment
Trade Centre. Considering that our greatest challenge is to diversify
the economy and create jobs, only really likely by way of foreign
investment, this will really be shooting ourselves in the foot.
Let’s hope...
* Read the article in The Voice newspaper (28 May 2019) for more information which is accessible here:
Transfer Duty amendment will reduce property yields
https://thevoicebw.com/transfer-duty-amendment-will-reduce-property-yields
ABOUT TIME, the quarterly
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Contributors: Sandy Kelly, Brett Marlin,
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ISSUE 38 - JUNE 2019