Finance Minister Malusi Gigaba confirmed on Wednesday the almost unanimous prediction of the pundits: VAT will be increased by one percentage point to plug a growing hole in the budget. Gigaba spent a substantial portion of his speech justifying that decision: SA has not "adjusted" VAT since 1993; it is low compared to "some of our peers". The government had increased personal income tax significantly in recent years and SA’s corporate tax rate is high by international standards. It was a game effort, but it does not obscure the brute fact that the ANC has crossed a Rubicon. Until this week, increasing VAT was the untouchable topic and undoable thing, the holy of holies. The reason often and correctly cited is that increasing VAT is regressive. Obviously, most of it is paid by the middle class in absolute terms, as Gigaba pointed out, but that is not the point. As a proportion of the respective incomes of people in different tax brackets, a VAT increase is almost the polar opposite ...
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