NEWS ANALYSIS: VAT hike essential to plug hole in revenue
The problem with raising personal and company income tax is that it could prove counterproductive, writes Claire Bisseker
Politicians, faced with a R50bn revenue shortfall, want to avoid the pain of fiscal austerity. But it is not a simple choice between hiking the value-added tax (VAT) rate or introducing a new wealth tax: both are going to be required to prevent SA’s debt from spiralling. The Davis tax committee is investigating the form a new wealth tax could take. It has received hundreds of submissions and aims to produce a draft report by the end of November. Whatever it concludes, international evidence shows SA will be doing extremely well if it raises more than R6bn annually from a wealth tax. This is just a drop in the ocean against the R50bn revenue shortfall expected for the 2017-18 fiscal year. "The problem with a wealth tax in SA is that it would be levied on an incredibly narrow base," explained committee head Judge Dennis Davis. "A huge amount of wealth in SA is also tied up in retirement funds, and we are busy investigating the implications of that." The committee is also concerned tha...
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