Middle class hardest hit
The increase in VAT will drive inflation higher and affect the average consumer’s pocket
Middle-class consumers will bear the brunt of tax reforms announced in Wednesday’s budget, despite there being no increases to personal income taxes, say experts. Following the first VAT increase in SA’s democratic history, consumers would pay more for all goods except the most basic food items, suggesting the middle class would be hardest hit, said PSG Konsult research head Ronald King. The VAT increase would drive inflation higher, hitting the "average consumer’s" pocket the hardest, said Kwaku Koranteng of Absa Asset Consulting. It would also increase the cost of saving and investment products, said Lance Solms, MD of iTransact. "Massive tax deductions are still available via retirement annuities and tax-free savings accounts," King said. Announcing tax measures to raise an additional R36bn in the 2018-19 tax year, Finance Minister Malusi Gigaba unveiled a one percentage point increase in VAT to 15%. SA’s personal income tax burden has grown in recent years. A top-tier income tax...
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