EDITORIAL: Reshaping the VAT of the land

2018-08-13 19:12

No one likes higher taxes, especially not when they are made necessary by holes blown in the budget by state capture, an epidemic of wasteful expenditure and a failing (former) president’s desperate knee-jerk reaction to the call for free tertiary education.

National Treasury has been eyeing the VAT rate for years, and this year finally hiked it by one percentage point in the hope of scratching together an extra R23 billion.

The outcry from the consumer, most especially the poorer consumer, is the correct reaction.

Numbers can lie. In this instance the extra VAT will, of course, mostly come from the rich. Only R3 billion of the R23 billion comes from the poorest 70%, according to the expert panel that Treasury hastily convened to ameliorate its VAT decision after the fact.

That misses the point.

The absurd extremity of inequality in South Africa makes that R3 billion far more important than the R20 billion the top 30% will pay.

Nothing is more important than the war on inequality.

Taking a conscious decision to make inequality worse, which is what an increase in the regressive VAT does, is the definition of a last resort.

The measures to make the effects on the poor a little less horrible can’t be left to a non-binding advisory body months later.

The expert panel constituted by Treasury to soften the blow delivered its report last week.

Its approach has been conservative: it recommends zero-rating six new items for VAT, some of which are fairly trivial contributors to the cost of living.

Many other items suggest themselves for zero-rating, but the panel’s list represents a minimal programme with which Treasury will be hard-pressed to find fault.

The ball is now in Finance Minister Nhlanhla Nene’s court.

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March 17 2019