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Calls to increase VAT over income tax

12 February 2015   (0 Comments)
Posted by: Author: Hanna Barry
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Author: Hanna Barry (Moneyweb)

Far more cost effective, far less politically expedient.

A one-percentage point increase to value added tax (VAT) would contribute in excess of R16 billion to government revenue annually, more than double the gain that would be realised from an increase to personal income tax, Standard Bank says.

Were government to increase personal income tax from 40% to 45%, it would gain just R7-R8 billion, Standard Bank chief economist Goolam Ballim said on Tuesday.

"Arithmetic does not necessarily inform policy. Ultimately the shape of public policy choices is [defined by] what is politically acceptable,” Ballim said.

In his Medium Term Budget Policy Statement (MTBPS), Finance Minister Nhlanla Nene said that progressive tax policy and administrative reforms would raise at least R27 billion over the next two years.

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