The one percentage point increase in value-added tax (VAT) that Finance Minister Malusi Gigaba announced in the budget on Wednesday has gone down very well in the market. But it isn’t going down well at all with the opposition or the labour movement or community groups. And the ANC itself is ambivalent: its parliamentary caucus, according to finance committee chairman Yunus Carrim, did not support the increase and is concerned the poor will be hit hard. Its secretary-general, Ace Magashule, has said the government should consider adding more items to the list of zero-rated items to cushion the poor from the effect of the higher rate. Faced with a gaping fiscal hole and the threat of being roundly junked by the ratings agencies, Gigaba had to offer a revenue measure that could be relied on to bring in large sums of revenue. A VAT increase was the only real option, and there was even serious thought of a two percentage point hike rather than the one percentage point hike. That 85% of ...
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