By John Fraser
As a ubiquitous tax, VAT has many critics.
Whereas income tax or corporate tax have thresholds below which your earnings are not plundered, VAT applies to all purchasers of goods and services. There are a few ‘zero-rated’ exemptions for sanitary pads, bread flour, cake flour and a limited list of other necessities.
(Bizarrely, my own necessities of whisky, red wine and foie gras do not receive the same humane treatment.)
Rich or poor, black or white, male or female – paying VAT on most stuff is as inevitable as death. It is unfair but is seen to be a necessary instrument for topping up the government coffers.
Which is why Tito Mboweni’s looming budget – due to be inflicted on us all on the 26th of this month – is going to be a tough one.
Accountancy firm PwC believes that even with some spending cuts, and taking into account tax rises which are already in the pipeline, around R25bn more will have to be raised.
Some of this from VAT.
The only question is whether the Finance Minister Tito Mboweni will take VAT up from the current 15% to 15.5% or to 16%.
“There will be no option but to pull the VAT lever,” warned PwC tax supremo Kyle Mandy.
And his economist colleague Lullu Krugel agreed there are tough times ahead: “This is the toughest budget since 1994,” she argued.
These are not lone voices, crying in the wilderness. No one seriously believes that we can have a soothing, pain-free budget on the 26th.
Given the plague-like indiscrimination of VAT, this tax-hike which is so widely expected will hit customers in shabeens and in the plushest of restaurants, shoppers in Spaza stores and in Woolworths.
Like government corruption, it will be impossible to escape.