South Africa leaders agree to review impact of VAT increase

26 Feb 18

South Africa’s ruling party has said it will look at ways to soften the impact of the new VAT rates on poorer people by adding more zero-rates and tax-free items.

Labour unions and civil society groups have challenged the country’s VAT increase, the first in 25 years, because its potential effects on poor people.

Ace Magashule, secretary general of the ruling, African National Congress party, said it would look at ways to alleviate any negative consequences for the less well off.

Magashule also said the party would discuss the issue of cabinet appointments under president Cyril Ramaphosa, who was sworn in earlier this month and pledged to take action on corruption and to boost the country’s economy.

Finance minister Malusi Gigabe announced the increase in VAT in his budget speech on 21 February. The tax will increase to 15% from 14% from April as part of South Africa’s efforts to cut the deficit and stabilise debt.

The move is expected to generate an additional 23bn rand (£1.4bn) of revenue in the 2018-19 year.

Magashule said in response to questions about the meeting to put together the new cabinet: “We don’t have an agenda tomorrow – it’s a normal officials’ meeting. If [the VAT issue arises] it will be part of our discussions.”

Speaking ahead of the budget, finance minister Malusi Gigaba said South Africans would have to “bear some pain” as a result of the “tough decisions” made in the budget to stabilise the country’s debt.

South Africa scored highest, along with New Zealand, on global budget transparency in last week’s Open Budget Survey, which found efforts to make budgets more transparent have stalled for the first time in a decade.


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