harsh supplementary budget in which the tax burden was significantly increased with the introduction of surtax on airtime, presumptive tax on commuter omnibuses, capital gains tax on the sale of securities, the increase in the prescribed assets ratio and valuation method, and other drastic measures.
Key to the stock market was the scrapping of the 2% Stamp Duty on the sale of shares with effect from 1 January 2006. This move is likely to result in increased activity on the market.
The corporate tax payment system was adjusted in a way such that the bulk of the payments were brought to the second half. This should have a direct effect on money market liquidity at around the payment dates. Value Added Tax, which was increased to 17.5% in the supplementary budget two months back, was brought back to 15% w.e.f. 1 January 2006.
The withholding tax on interest will now be deducted on maturity rather than upfront. Carbon tax will no longer be based on engine capacity but consumption hence it will be collected at the point of importation of fuel at $1000/litre. The budgeted expenditure seemed to amount to $123 trillion while the financing requirement was projected at $13.9 trillion.
The budget deficit is forecast at 4.6% of GDP. On the overall the announcement was simply just another flat event that lacked adequate preparation as no specific figures on revenue and expenditure were given leaving everyone to use inference.
The market however responded well to the budget, not necessarily due to the content but because the air had been cleared and the tone for 2006 set. The market is likely to continue to progress gradually upwards right up to year end though sharp movement could be recorded on the last days of the month.
The top gains of the week were the two pharmaceutical companies CAPS and MEDTECH which each advanced 50% to $900 and $75. Also amongst the advances was CELSYS, which seems to be redeeming itself from penny stock status as it put on 36% to $150.
Leading the declines were MASH and EDGARS which each lost 32% to $880 and $8500. Both stocks have become screaming BUYS at the current prices.
Trades on the Interbank forex market continued to slowly pick up with some exporters willing to liquidate at the interbank rate which is creeping up on a daily basis. On Friday trades closed at 71,936.57 which was a 4% devaluation in the week. The South African Rand held onto the previous week’s gains.
Post published in: Economy