Poor and middle class consumer will bear the brunt if VAT is increased by 2% on 12 March and economists warn consumers are already under pressure.
Poor and middle class consumer will bear the brunt if VAT is increased by 2% on 12 March. Economists warn consumers are already under pressure.The decision to increase Value-Added Tax by 2% in the undelivered Budget 2025 will increase inflation, which will, in turn, give the Reserve Bank reason to pause cutting the repo rate in an environment where consumers are already battling to keep their heads above water.
“Given the cost-of-living crisis we are dealing with, our interest rates are still fairly high and we are sitting with high unemployment. Therefore, any additional tax will be quite negative for the consumer base in South Africa.” Is there any other way to increase revenue rather than increasing VAT by 2%? Ackerman says there is: we must fast-track reforms and structural changes to get the economy going. “I think that is the silver bullet.”
“Therefore, applying zero ratings in more goods would somewhat erode its efficient and broad-based nature, requiring higher rate changes as the potential VAT collected from those goods would need to be shifted to other goods.”
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