These are the chances South Africa will see another VAT increase

Following the first VAT rate increase in 25 years, questions have been raised as to whether South Africa could see another increase in the coming years.

Speaking to BusinessTech, tax manager at Mazars Tertius Troost said that the likelihood of a VAT increase in 2019 was currently ‘very slim’.

This is mostly because the VAT rate is a very politically charged tax and 2019 is an election year, he said.

“After the MTBPS we will have a better understanding of whether SARS will be able to meet its revenue collection target of R1.345 trillion.

“If the revenue deficit (the difference between what needs to be collected and what is actually collected) is too large we can start to weigh up the different possibilities to increase tax revenue.

“Unfortunately, a further increase in the VAT rate in future years would have to go hand in hand with some sort of dispensation to the poor,” Troost said.

He added that South Africa was more likely to see a higher VAT rate on certain luxury items in future years if Treasury requires further tax revenue.

“The more popular stance would entail cutting government expenditure, rather than having further tax increases.”

Other taxes

Troost noted that there were also other taxes that government could introduce to address its growing shortfall.

This will include the implementation of Carbon Tax from 1 January 2019, he said.

“The Medium-Term Budget Speech (MTBPS) will hopefully shed more light on its implementation, however, I believe that the effective date might be postponed again – probably more to the end of 2019.”

“In addition, we hope that more information will be provided on how NHI will be implemented and funded,” Troost said.

“With regards to new taxes or increases, the MTBPS does not usually result in the announcement of tax rate changes, but it does provide insight of what we can expect in February or even further in the future.

“I don’t see any specific increases happening soon, except for the possibility of an increased VAT rate on luxury goods (ie, a tiered VAT system).”

Read: Here’s what South Africans think of SARS – and the possibility of a tax revolt

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These are the chances South Africa will see another VAT increase