During his maiden budget speech, Finance Minister Malusi Gigaba made the expected announcement that the value-added tax (VAT) rate will increase to 15% from April 1. This is the first increase in the VAT rate since April 1993 and the second since its introduction in 1991. Government is battling an expected revenue deficit of R48.2bn and with the added burden of funding free higher education for students from lower income categories, an increase in at least one of the major taxes was inevitable. The choice of VAT was justified as an "efficient, certain source of revenue" with "the least detrimental effects on economic growth and employment". The rate increase is expected to raise additional tax revenue of R22.9bn. The rate adjustment will result in a 0.88% rise in the price of standard-rated goods and services to the end-consumer. According to Gigaba, the regressive nature of a VAT rate increase is ameliorated by the zero-rating on basic foodstuffs. An increase in social grants is al...

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