VAT increase accepted reluctantly – Finance Committee – POLITICS

Financial Committee reluctantly accepts VAT increase

November 13, 2018

After considerable consultation and consultation, including three sets of public hearings, the Standing Finance Committee reluctantly accepted the VAT increase of 1%.

During the public hearings, there was almost unanimous opposition to the increase of civil society. The Committee has expressed serious reservations from the outset with regard to the increase in, among other things, the negative consequences for the poor and low-income people, who are already dealing with increases in fuel prices and the cost of living in general.

However, the committee is also well aware of the serious constraints of the budget and the desperate need to generate additional income. "The pressure has become more poignant after the introduction of the Medium Budget Policy Statement (MTBPS), which estimated economic growth of 0.7%, and the MTBPS also unexpectedly predicted a revenue shortfall of R27.4 billion this financial year, including R20 billion in VAT revenue deducted, "said Mr. Yunus Carrim, chairman of the committee.

The committee welcomes the zero rate of white bread flour, cake flour and sanitary towels, as well as the decision to offer free sanitary towels to students. However, it is of the opinion that there may be more targeted expenditure to absorb the impact of VAT on the poor, by re-establishing priorities within the expenditure ceiling. National Treasury should consider effectively the possibilities of increasing the allocation of free water and electricity to needy households and vouchers for uniforms for pupils in schools without reimbursement for locally produced school uniforms.

"More than ever, the parliament and the government need to ensure that more income is gained by substantially boosting the capacity of the South African Revenue Services to generate more revenue, reduce drastic waste of expenses and tackle the illegal economy and corruption more effectively. More revenues will also come from investments, economic growth and job creation, "said Mr. Carrim.

The committee believes that the increase should be reluctantly accepted, but should be revised at the end of the third year of implementation, 1 April 2021, after an evaluation of the impact of the tariff on revenue collection and the poor. .

Mr Carrim said that this approach offers both security for the tax authorities, to increase the revenue needed for the medium-term expenditure period, and to allow for a review taking into account economic and financial circumstances.

Published by Justice Molafo on behalf of the Finance Commission, 13 November 2018

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