POLICY RATIONALE IN FAVOUR OF THE CAPITAL GAINS TAX
- National Treasury’s goal is to lower the rate by broadening the base.
- The CGT is an essential ingredient for broadening the base
- "The Horizontal Equity Principle" - People with different forms of earnings should be taxed equally. Capital gains are merely earnings in a different form.
- "The Vertical Equity Principle" – The Income Tax Act is based on a progressivity (i.e., taxpayers with greater earnings should be subject to a progressively higher tax). Failure to tax capital gains undermines this principle.
- Failure to tax capital gains undermines taxpayer morale of the salaried worker.
- The distinction between capital gains versus ordinary revenue stems from an outmoded system of feudal property law.
- The CGT is not a wealth tax.
- The CGT will have little impact on capital investment.
- The CGT will have little impact on foreign investment.
- The CGT will equalise the tax treatment of passive speculative investments versus ordinary business investments.
- The CGT will equalise the tax treatment among certain passive speculative investments.
- The CGT will promote investment with greater risk.
- The low proposed CGT rate will prevent any undue lock-in effect for investment.
- The low proposed CGT rate is intended to offset the effects of inflation. National Treasury thereby acknowledges that indexation is administratively complex.
- The relatively flat proposed CGT rate is intended as an offset against the bunching of income within a single year.
- The CGT will deter taxpayers from artificially mischaracterizing ordinary revenue as capital gains.
- The complexity argument against the CGT is overstated because our proposed CGT excludes gains on assets normally acquired by the middle and lower classes.
- The CGT should eventually provide an annual yield of R1-2 billion plus a substantial yield for ordinary revenue mischaracterized as capital gains.

The Proposed CGT and the Katz Commission.
- The consultation process for the CGT is fully open and sufficient.
- The CGT should not be delayed for further study.