INCREASES in VAT and the
fuel levy will bring muchneeded
revenue to the
Treasury, but also cut into
the disposable income
of consumers and likely
result in higher airfares
respectively.
These were some of
the interventions Finance
Minister Malusi Gigaba
announced in his 2018
budget speech on
Wednesday.
While analysts have been
predicting an increase in
VAT for years, the Minister
confirmed this, raising VAT
for the first time in over a
decade. VAT will increase
by a percentage point from
14% to 15%.
“We have not adjusted
VAT since 1993, and it is
low compared with some
of our peers,” he said.
“We therefore decided
that increasing VAT was
unavoidable if we are to
maintain the integrity of
our public finances.”
The Minister also
announced below-inflation
adjustments to personal
income tax brackets.
As well as an increase in
VAT on fuel, the Minister
announced that carbon tax
would be implemented on
January 1, 2019.
The Minister also made
reference to President Cyril
Ramaphosa’s undertaking
to intervene decisively to
stabilise and revitalise
state-owned enterprises.
He emphasised that
a new board and ceo
had been appointed at
SAA, while the long-term
turnaround strategy was
being implemented. “Stateowned
companies are
expected to fund their own
operations.”
He was upbeat about
economic growth. “The
2017 GDP growth
projection has been
revised upward to 1%,
which is higher than the
0,7% expected at the time
of MTBPS last year,” he
said. “We are anticipating
growth of 1,5% in 2018,
rising to 2,1% in 2020.”
