#Budget2018: Banking association deems Value-Added Tax increase necessary

  • #Budget2018: Banking association deems Value-Added Tax increase necessary

#Budget2018: Banking association deems Value-Added Tax increase necessary

Finance Minister Malusi Gigaba's budget speech comes less than a week after South Africa's leadership transition.

The VAT hike is central in a set of tax increases, including higher estate and luxury goods duties and an extra 52 cents per litre in fuel levies, to generate an additional R36-billion for the national purse.

"We have not adjusted Value-Added Tax since 1993, and it is low compared to some of our peers".

"We need not describe how critical a minister of finance is to Ramaphosa because he knows that the removal of Nhlanhla Nene and Pravin Gordan was a move to capture the public purse directly by the Gupta family".

Any impact in the lower LSMs can be countered with support in the grants system and potentially zero-rating more basic needs on food items and other necessities.

Social grants are also to be increased from 1 April.

According to the Budget Review, additional personal income tax increases were not an option. For every 1% increase in the VAT rate, the fiscus should see tax collection increase by R22 billion.

At 0655 GMT, the rand traded at 11.75 versus the dollar, 0.17 percent weaker from its overnight close in NY.

Despite an improved outlook, government was still facing a revenue gap of R48,2 billion in the current year.

Consolidated spending would increase from R1,67 trillion in 2018/19 to R1,94 trillion over the medium term.

Gigaba said that the consolidated deficit was projected to narrow from 4,3% of GDP in 2017/18 to 3,5% in 2020/21, helping to stabilise the gross debt-to-GDP ratio at 56,2% of GDP in 2022/23, and declining thereafter.

It also revised its projection of GDP growth for 2017 to 1 percent, up from the previous 0.7 percent figure.

Gigaba said NSFAS funding for returning students would be converted into bursaries.

More alternatives in its view could have been instituting a land tax, particularly on unused land, and increasing property taxes, particularly on non-residents and those owning multiple homes. "With the state of affairs in our country, high unemployment and inequality, too many people depend on incomes of individuals to survive", the EFF said.

And R6-billion was found for drought relief and related public infrastructure development.

"The 2017 Gross Domestic Product (GDP) growth projection has been revised upward to 1 percent, which is higher than the 0.7 percent expected at the time of the Medium Term Budget Policy Statement (MTBPS) past year", Malusi Gigaba said while presenting the budget in parliament. Workers are not the ones who have looted Eskom, SAA and the state.