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VAT at 16%?

Tuesday, 04 March 2014   (0 Comments)
Posted by: Author: Ingé Lamprecht
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Author: Ingé Lamprecht (Moneyweb)

An increase in the standard value-added tax (VAT) rate of 14% by one or two percentage points could reduce the pressure on the fiscus and would bring South Africa more in line with a number of international jurisdictions around the world.

However, it will be an extremely unpopular move with unions and other political groups, who argue that it will be to the detriment of the poor.

The Tax Review Committee, headed by Judge Dennis Davis, is currently considering potential amendments to the VAT system, with a specific focus on efficiency and equity.

Potential ways of increasing fiscal revenue have been a topic of discussion for some time. The minister of finance is under pressure to reduce the budget deficit amidst heightened scrutiny from ratings agencies. The budget deficit is projected to be 4% of gross domestic product (GDP) in the 2014/15 fiscal year.

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