Anyone hoping for a VAT reduction in the near future – all of us, really – will be left disappointed following Tuesday’s decision.
Sadly, our fellow South Africans, the prospect of a VAT reduction seems a long way off. Hopes were dashed during a Parliamentary hearing on Tuesday, where a financial committee said they had no choice but to “reluctantly accept” the situation.
The group had gathered to inquire about rejecting the increase, which has been in place since 1 April this year. Value-Added Tax climbed from 14% to 15%, affecting everything from the price of groceries to the cost of fuel – something that continues to be a thorn in our sides.
When will we see a VAT reduction in South Africa?
However, there would be no such luck for the ordinary citizen, and the board decided to uphold the changes enforced by Cyril Ramaphosa. They also stated that there should only be a review of this fiscal policy in April 2021, meaning that the earliest we’ll see a decrease is in three years’ time:
“The committee believes that the increase has to be reluctantly accepted, but should be reviewed at the end of the third year of its implementation, 1 April 2021, following an evaluation of the impact of the rate on revenue collection and the poor.”
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Yunus Carrim is the Chairperson of the finance committee. He went on to explain the logic behind keeping the VAT increase in place, saying that South Africa’s economic forecast actually worsened after the price hike:
“The pressures have become more glaring following the introduction of the Medium Term Budget Policy Statement (MTBPS), which estimated 0,7% economic growth. The MTBPS also unexpectedly forecast that there will be a R27.4 billion shortfall of revenue this financial year, which includes R20 billion of VAT returns that have been withheld.”
“More than ever, parliament and government have to ensure that more revenue is secured through considerably strengthening capacity at the South African Revenue Services to raise more revenue, drastically reducing wasteful expenditure and more effectively tackling the illicit economy and corruption.”
The committee concluded their meeting by suggesting steps the Treasury could take to ease the burden on SA’s poorest citizens. They believe that the allocation of free water and electricity must be expanded to indigent households and that learners must pay less for school uniforms made by local companies.
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