After years of predicting a value-added tax (VAT) hike, economists and analysts might finally get their predictions right in Wednesday’s budget. VAT was introduced in SA in 1991 and was only last hiked in 1993, mainly because of the regressive nature of the tax. Lower-income groups and the poor are affected more negatively by VAT than higher-income groups. But with a budget shortfall of R50bn this fiscal year, the government will be left with few options but to increase the tax. This is despite labour federation Cosatu warning that the poor should not carry the burden of a VAT hike in the face of rampant corruption and overspending prevalent during the Jacob Zuma presidency. The VAT rate of 14% is equally applicable to every citizen. "A one percentage point increase in VAT can no longer be avoided," said FNB chief economist Mamello Matikinca. "An increase to 15% could generate as much as R24bn." Other economists agreed, as there was limited scope to continuously increase personal ta...
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