Above-inflation welfare grants will help offset effect of VAT hike on poor, says Treasury
The Treasury has allocated above-inflation increases to welfare grants to help cushion the poor from the impact of the increase in value-added tax (VAT), announced earlier on Wednesday. It said raising VAT was less harmful to economic growth than raising other taxes, and the zero-rating of paraffin and 19 basic foods including brown bread, beans, rice and maize would limit its effect on poor households. VAT is to rise by one percentage point, from 14% to 15%.The Treasury has added an extra R2.6bn to the allocation for welfare grants over the next three years to partially offset this increase, it said. All grants except the foster-care grant would increase faster than consumer price inflation, which the Treasury estimated was 5.3% in 2017 and would remain steady in 2018. It forecasts consumer price inflation will rise to 5.4% in 2019 and 5.5% in 2020. The foster-care grant will increase by only 4.6%, but Parliament is expected to soon consider a proposal for higher child support gran...
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