REVENUE SHORTFALL
Why the VAT increase is the safest way to get SA out of the quagmire
Despite a slightly lower revenue shortfall compared with the R50.8bn estimated at the medium-term budget policy statement, the shortfall remains large at R48.2bn. A significant portion of the shortfall is attributed to lower personal income tax collection. The unexpected announcement of fee-free education, which will cost the state about R56bn over the medium term, together with a rising debt-to-GDP ratio of 53.3%, left the Treasury with very little choice but to cut expenditure and increase taxes, including value-added tax (VAT). The main taxes include a one percentage point increase in VAT to 15%, effective on April 1. Of the R36bn that the Treasury hopes to raise through taxes to reduce the budget deficit and fund fee-free higher education, R22.9bn will come from the increase in VAT. Other increases include a jump in the general fuel levy of about 22c/l and a 30c/l rise in the Road Accident Fund levy, an increase in excise duties for luxury goods, a rise in estate duty to be levi...
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