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| Tax Proposal Lowers South African Fund Inflows |
by Lorys Charalambous, Tax-News.com, Cyprus
Tuesday, August 02, 2011
The anticipated change in the tax treatment of dividend income funds, included
in the 2011 Draft Taxation Laws Amendment Bills issued early last month, contributed
to reduced inflows for the South African unit trust industry in the second quarter
of this year.
Leon Campher, chief executive officer of the Association for Savings and Investment
South Africa (ASISA), which released the quarterly data yesterday, indicated
that, while the local collective investment schemes (CIS) industry attracted
net inflows of ZAR4bn (USD598m) in the second quarter of this year, the bulk
of these flows consisted of income reinvested. Without reinvestments, the industry
would have seen a net outflow of ZAR5bn.
Campher explained that the draft taxation amendment bill has indicated that
a tax loophole would soon close for dividend income funds, causing investors
to exit them. As a result, the domestic fixed interest fund category, which
houses these funds, suffered net outflows of ZAR1.3bn in the second quarter
of this year.
However, it was also seen that domestic money market funds posted the biggest
net outflows for the quarter of ZAR9.9bn. Campher was therefore not too concerned
at the state of the CIS industry overall. “A closer look at industry statistics
has shown that the (money market) withdrawals were made by a few corporate investors,”
he said. “This is not necessarily a bad thing since these corporates may
well have ring-fenced this money for development projects or other investment
opportunities.”
At the end of June 2011, the CIS industry’s total assets under management
stood at ZAR956bn.
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