CAPE TOWN: In addition, there’s an increase in the grants to low income level people in SA as well. That’s the official message out there from the ministry. I think it is a bit more complicated than that. The zero-rated food items have been more or less static since the inception of VAT about 28 years ago. So, whether zero-rated items are really scientifically proven to assist the poor is a big question mark. I think there will be a very strong impact on the poor. However, I’m also not saying that the increase was wrong or the incorrect thing to do at the time.
Exactly, we needed about R51bn and then it got reduced to about R36bn. The VAT hike of one percentage point raises about R22.9bn. So, that brought us about two-thirds to closing the gap. I think the stress on the personal income tax and the high corporate tax rate left only VAT to be considered. If we had an efficient government in the sense of State-Owned Enterprises (SOEs) and no waste I think we wouldn’t have reached this point. But it left us at this point, as a result of those various factors that I’ve just briefly mentioned.
