CAPE TOWN-- South African Finance Minister Malusi Gigaba's Budget Speech has made difficult decisions in his 2018 Bugdte in order to address a revenue shortfall and to fund free higher education by raising the value-added tax (VAT) rate, the fuel levy and the estate duty tax.
On the other hand, he announced some relief for the poor and the working class in the form of below inflation increase in personal income tax, while ensuring an above average increase in social grants when presenting the Budget in Parliament here Wednesday.
Gigaba said the measures were being introduced mainly to generate an additional 36 billionRand (about 3.08 billion US dollars) in tax revenue for 2018/19.
The main tax proposals for the 2018 Budget are: an increase in the VAT rate from 14 per cent to 15 per cent, effective 1 April 2018; a below inflation increase in the personal income tax rebates and brackets, with greater relief for those in the lower income tax brackets;
An increase in the ad-valorem excise duty rate on luxury goods from 7.0 per cent to 9.0 per cent; a higher estate duty tax rate of 25 per cent for estates greater than 30 million Rand in value; a 52 cents per litre increase in the levies on fuel, made up of a 22 cents per litre for the general fuel levy and a 30 cents per litre increase in the Road Accident Fund Levy, and increases in the alcohol and tobacco excise duties of between 6.0 and 10 per cent.
Gigaba said increasing VAT was unavoidable, as there was a need to maintain the integrity of public finances.
In developing these tax proposals, government reviewed the potential contributions from the three major tax instruments, which raise over 80 per cent of our revenue -- personal and corporate income tax and VAT," he added. ?
We have increased personal income tax significantly in recent years, particularly at the higher income bands, and our corporate tax is high by international standards. ? e have not adjusted VAT since 1993, and it is low compared to some of our peers. We therefore decided that increasing VAT was unavoidable if we are to maintain the integrity of our public finances."
Source: NAM NEWS NETWORK