The indexation of inflation for capital gains tax in South Africa

Abstract

This study investigates the possibility of indexing inflation on capital gains tax in South Africa. The research question asks to which extent inflation will have an effect on capital gains tax, and the study aims to answer this question by means of a comparative study between the South African and Canadian tax regimes. The benefit of this comparison lies in the fact that the Canadian tax regime provides for the indexation of inflation on capital gains tax. South African legislators should consider the differences between these tax regimes as there may be new lessons that may be learned from a Canadian perspective. The problem, however, is that no provision is made in the Income Tax Act 58 of 1952 or other legislation for the indexation of inflation on Capital gains tax in South Africa. Before recommending that the South African legislator amend current legislation to accommodate the indexation for inflation on Capital Gains Tax, inflation and its effect on the economy and investments in South Africa have to be considered.