BL Premium reports that the Treasury has compromised on its proposed two percentage point VAT increase by opting for a half a percentage point hike in each of the next two years.
This year’s proposed VAT increase will take effect on 1 May and next year’s on 1 April. To compensate for the reduced revenue, the additional spending on social grants envisaged in the rejected February budget has been significantly reduced. Specified social grants will be increased by more than the expected inflation rate but less than was envisaged in February. Also, there will be no tax relief for income earners, whereas the draft February budget had envisaged some tax relief to lower brackets of the income tax table. According to the Budget Review, there will be no inflationary adjustment to tax brackets (so-called fiscal drag, which happens when inflation-related wage increases push taxpayers into a higher tax bracket) and rebates in 2025/26. While there will be no increase in the general fuel levy at a cost of about R13bn over three years, above-inflation increases have been proposed on excise duties on alcohol (6.75%) and cigarettes (4.75%). As envisaged in the rejected February budget, the basket of zero-rated food items will be expanded at a cost of about R2bn in each of the three years of the medium term to mitigate the impact of the VAT increase on the poor. The Treasury resisted calls to increase the corporate income tax, which is now 27%. “Corporate income tax is imposed on businesses but ultimately paid by shareholders, workers and consumers. SA already has a high contribution of corporate income tax towards tax revenue and VAT is relatively low compared to our peers, the Treasury noted.
- Read the full original of the report in the above regard by Linda Ensor at BusinessLive (subscriber access only)
- Lees ook, BTW wel verhoog, maar nie so drasties, by Maroela Media
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