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The death rattle

The death rattle

Proposed Transfer Duty changes could kill businesses

It is feared the proposed Transfer Duty Amendments Bill could have far-reaching effects, including killing existing businesses and eroding Foreign Direct Investment (FDI).

Transfer Duty is defined as a form of tax payable to the Registrar of Deeds whenever an immovable property – such as land or a house – changes hands.

This form of tax is paid by the buyer and is payable on the selling price of the immovable property or at the market value.

Amendments were published in November 2018, with one of the planned changes to increase Transfer Duty for non-citizens from 5 percent to 30 percent.

Speaking to Voice Money this week, a tax specialist, Jonathan Hore warned this could prove catastrophic to FDI.

“We expect the new bill to exclude the 30 percent as that would scare away foreign investors and create an impression that the country is not investor friendly,” explained Hore, saying so far they have been met with fierce resistance.

Hore further predicts the property market is likely to crash as prices soar but demand remains flat.

He also notes that banks are likely to lose out on loans provided under mortgage arrangements, as loaned amounts will exceed property values.

“Some suggest that ownership of land by non-citizens be subjected to ministerial approval, but that will complicate ease of doing business. Better increase Transfer Duty to say 12 percent maximum,” argued Hore.

Last week, Finance Minister, Kenneth Matambo told parliament that the Bill, which he says he intends to present next month, will ensure citizens are exempt from paying Transfer Duty under certain circumstances. These include a citizen buying residential property for the first time to be used as own home.

Furthermore, as a way of encouraging Batswana to acquire land, citizen exemption on payable duty is expected to be increased from P200, 000 to P500, 000.

According to Hore, he foresees the Bill sailing through.

“It was not debated in parliament due to protests from tax consultants, Real Estate Institute and Business Botswana among others,” reasoned the tax expert.

It is rumoured that businesses have approached Business Botswana to make representations to the Ministry of Finance and Economic Development and Government to stop the proposed 25 percent increase on Transfer Duty for non-citizens.

Business Botswana has reportedly also cautioned government to apply due care when reviewing the fiscal legislation to avoid unintended consequences.

The business advocacy body noted that some of the recent tax changes, which were not subject to a consultative process, will have a potentially serious adverse impact on the private sector and will discourage investment.