Finance minister Tito Mboweni has called on South Africans to provide advice on how to get the economy growing again. Faced with falling revenues, mounting debt and a bleak economic outlook, to supposedly soften the looming fiscal catastrophe the government may be tempted to increase taxes to bolster its coffers. This should be avoided at all costs. Instead, Mboweni should reduce expenditure on an already bloated state and institute policies that are known to lead to greater levels of economic growth.

Many economic and market analysts are predicting a rise in VAT from 15% to 16%. However, any increase in the VAT rate would be devastating for the poorest and most vulnerable members of society and plunge them into deeper levels of poverty. VAT is a regressive tax that disproportionably affects the poorest members of society. The tax burden on a given product, which is the same for the rich and the poor, consumes a larger share of a poor person’s income than that of a rich person...

BL Premium

This article is reserved for our subscribers.

A subscription helps you enjoy the best of our business content every day along with benefits such as exclusive Financial Times articles, ProfileData financial data, and digital access to the Sunday Times and Sunday Times Daily.

Already subscribed? Simply sign in below.

Questions or problems? Email or call 0860 52 52 00. Got a subscription voucher? Redeem it now