Rudie Nel
Abstract
In South Africa the corporate tax rate was reduced during 2022 with the intention to encourage investments. This study aimed to explore whether the corporate tax rate reduction would encourage investments in shares in South Africa by considering the tax preferences of investors, tax incentives, and tax simplification. An exploratory study was performed with three objectives: (i) To analyse the tax preferences of investors (after-tax returns of investments in shares) based on South African tax rate reform for the period 2008 to 2023; (ii) To review current tax incentives in the Income Tax Act aimed at encouraging investments in shares; (iii) To consider tax simplification of the Income Tax Act as a method to encourage investments in shares.
The present study concluded on objectives with three main findings. Firstly, increases in applicable tax rates since 2008 would have discouraged, rather than encouraged investments in shares by individual investors and enunciate the need for further tax reform to encourage investments. Secondly, further research in respect of investment subsidies, as a tax incentive, in the form of income tax relief and/or preferential tax rates is recommended. Finally, further research on tax simplification is recommended particularly relating to anti-avoidance provisions in the Income Tax Act to encourage investments in shares.