SARB- SA’s VAT rise wont lead to higher interest rates

LONDON- The South African bank expects a hike value of added tax (VAT) to increase to around 0,6% points over the next couple of months of this year, but they are not expected to raise interest rates in response to the VAT increase.

Brian Kahn told Reuters after an investor meeting in London,”With inflation targeting, you try and look through exogenous shocks, particularly temporary ones and this is a one off,”

“There may be a few second round effects, it may affect wage increases in the following years, so we expect a moderate, very small increase in the following year as a result of that.”

“But it is something that we would not react to by raising rates and we would certainly try and look through it.”

Former finance minister Malusi Gigaba announced in his 2018/209 budget speech that VAT will increase from 14% to 15%,  the first time that tax has increased since 1993.

The tax increase was expected by many financial expects as the shortfall in revenue and the amount of maladministration in government had to address the shortfall of economic targets in the country.

Photo Credit- EWN

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