CAPE TOWN- Finance Minister Malusi Gigaba will deliver a “tough and unpopular budget” on Wednesday that will include increases in valued added tax (VAT) and personal income tax.
The City press reported that a senior bureaucrat at the National Treasury has said there needs to be “tough decisions” to be made to fill the close to R51 billion revenue shortfall, which Gigaba announced during the medium-term budget policy statement in October.
Gigaba will attempt attempt to raise half of the R51 billion by cutting expenditure, and the other half from revenue management.
“It is hard news to swallow, but VAT and personal income taxes are set to climb. It will be hard now, but South Africans will reap the rewards in five years. You simply cannot avoid taxes this time around.”
The City Press reported that Nedbank economists predicted that the budget speech had, “…an outside chance that the VAT rate will be increased from its current 14%, with more essential goods added to the list of zero-rated goods to protect the poor.
“There is also a possibility the VAT rate on luxury goods could be raised … The VAT rate has been left unchanged since 1993, but an increase ahead of next year’s general election still seems unlikely … A hike to 16% from 14% would currently raise nearly R50 billion before targeted relief.
“Well above-inflation increases are expected in the general fuel levies. The zero VAT rating on fuel may also be removed.”
Any increase in VAT will be unpopular, the finance minister could face opposition from Cosatu and the SA Communist Party, who supported President Cyril Ramaphosa bid to become ANC president.
Photo Credit- BusinessLIVE
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