Re­gard­ing the Bud­get…

Finweek English Edition - - MARKET PLACE -

I want to touch on two parts of a packed Bud­get. The limit on con­tri­bu­tions to tax-free prod­ucts has been in­creased to R33 000 per in­di­vid­ual per year. This is a mod­est in­crease in rand but to­tally un­ex­pected, and given that tax-free is a long-term in­vest­ment, great news. At this point, the life­time limit of R500 000 has not been ad­justed but that is moot as we are more than a decade away from hit­ting it. The other big­gie for in­vestors is the in­crease in div­i­dend with­hold­ing tax (DWT) from 15% to 20%. I love div­i­dends and this ex­tra tax hurts. But I still love them any­way. The re­sult may how­ever be more share buy-backs as this at­tracts no tax and ben­e­fit share­hold­ers, un­less the buy-backs are done at over­val­ued prices. In his an­nual let­ter, War­ren Buf­fett com­ments on his sup­port of buy-backs, but only at prices that make sense. That price is ei­ther close to tan­gi­ble net as­set value or be­low in­trin­sic value. But his­tory tells us com­pa­nies buy back shares at any price and that can of­ten hurt share­hold­ers if done at in­flated prices. Share buy-backs are voted on at the an­nual gen­eral meet­ing and if the rules re­gard­ing prices to be paid are not in place, vote against them.

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