EDITORIAL: An inevitable tax increase
We can expect a range of measures loosely grouped under ‘wealth taxes’ to fill the gaping hole in the budget
South Africans are facing a thumping tax increase at exactly the moment the economy needs it least. The fact that a big tax hike is coming is old news: it was signalled in the medium-term budget last year. Exactly what form the tax increase will take is news: its form and precise extent will be revealed only in the budget next month. In the meantime, the Treasury is desperately trying to find ways to spin the tax increase in a way that doesn’t unnecessarily shock the economy or the electorate. That is going to be a tall order. The hole in the budget is so big that even a single percentage point increase in the VAT rate won’t cover it. Economists estimate that would bring in only about R22bn and this seems now an unlikely outcome because VAT increases are retrogressive. Neither will failing to provide relief for fiscal drag do it — that would bring in only about R15bn. Even increasing the maximum marginal rate by two percentage points won’t be enough. So, we can expect a range of mea...
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