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How CGT taxes inflation

Did it ever occur to you that CGT is not a capital gains tax? It is a tax on inflation!

Let’s say that in 2003 you bought a property for R1m. You sold it in 2015 for R2m and average inflation over that time was 6%.

Those of you who have read my post on the Rule of 72 will be able to calculate that you made zero profit because over the 12 years, the value of money halved from R2m to an effective (buying power) R1m which is what you bought the property for in the first place.

So you’re no better off. In fact you’re a lot worse off because SARS has the audacity to tax the “Capital Gain” of R1m and depending on your marginal tax rate, that amounts to CGT of as much as R133 000! Talk about “Sin tax”. This tax is the greatest of all sins. And the higher the inflation rate, the greater the sin.

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