VAT unchanged at 14 per cent
26 February 2015
Posted by: Author: Ingé Lamprecht
speculation that Finance Minister Nhlanhla Nene would increase the value-added
tax (VAT) rate, VAT will still be levied at 14 per cent in the coming tax year.
In the lead-up to the
Budget Speech on Wednesday, some commentators said an increase of one
percentage point in the VAT rate could raise revenue of around R15 billion and
assist the minister in efforts to get additional income and reduce his budget
However, any potential
hike in the VAT rate would have received considerable resistance from labour
unions. VAT is perceived as a regressive tax that is more detrimental to the
But the move is a
sensible one, especially in light of the fact that the Davis Tax Committee, who
was tasked with a comprehensive review of South Africa’s tax system by former
Finance Minister Pravin Gordhan in July 2013, has yet to release its report on
VAT to the minister.
So far the Committee has
issued reports on small and medium enterprises (SMEs) and base erosion and
profit shifting (Beps), which have informed some policy changes.
However an increase in
the VAT rate has not been ruled out completely. There seems to be some scope to
increase it in future and the minister may want to keep the option in his back
pocket as a funding mechanism for large projects, for example the National
Health Insurance (NHI).
According to the Budget
Review "the [Davis Tax] committee has noted that compared with rates in other
countries, there appears to be some scope to increase taxes on capital income,
marginal personal income tax rates and indirect taxes such as fuel levies and
expects the committee’s report on VAT to be published soon. It will inform
policy considerations in the 2016 Budget.
This article first appeared on moneyweb.co.za