Much of the focus in the lead-up to Wednesday’s national budget announcement has been on the increased burden taxpayers can expect as Treasury seeks to plug a R50.9bn revenue hole.An increase in value-added tax (VAT) has been talked about for years, and could finally come this year. While VAT is widely believed to be a regressive tax that has a disproportionate effect on the poor, Investec Asset Management argues that this is the best of a bunch of bad options for Treasury.Nazmeera Moola, co-head of fixed income at Investec Asset Management, cites a 2015 study by Ingrid Woolard and others, which showed that in SA, because of the zero VAT rating for many basic goods, VAT is in fact a neutral tax — one that neither improves nor deepens inequality.Moola says a VAT increase of one percentage point, to 15% from 14%, would raise extra revenue of R23bn — or most of the R30bn in extra revenue that Moola calculates is needed."About R45bn of tax hikes and spending cuts are needed in the fisca...
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