By Azania Post Reporter
South African is planning to increase value-added tax from the current 14 percent to 15 percent come April, authorities have said.
The last time the Southern Africa economic giant added VAT was in 1993, when it increased it from 10 percent to 14 percent, said the City Press.
The local media quoted deputy minister of finance Sfisi Buthelezi saying the decision to raise VAT has been done following scientific process.
The deputy minister was quoted saying, “of all the devils, valued-added tax (VAT) is a better devil to deal with as far as tax is concerned.”
He said before, the country’s financial position was not sustainable especially when they tabled the medium-term budget in October.
Buthelezi said the government was having a debt and a debt to GDP ratio that was increasing which prompted it to take measures.
He said before raising VAT, they looked in all possibilities from personal income tax, company income tax, on what other countries are doing, then we went to VAT .
“We know that people always say VAT is regressive and that it affects the poorest of the poor, but we realized tha the last time we raised VAT is before the dawn of democracy , 1993 and when we compared with other trading partners , we were law. So we decided to increase VAT to fit the debts,” said Buthelezi.
“We found that VAT has the least effect on growth potential.
On Wednesday, finance minister Malusi Gigaba proposed tax increases worth R36 billion in the 2018/19 budget speech.
The bulk (84%) of the revenue will come from a higher VAT rate and limited fiscal drag. VAT was raised by one percentage point to 15percent, which adds R28.7 billion to revenue.