Cape Town - Politics played a big role in the Budget Speech delivered by Finance Minister Pravin Gordhan, reckons Keith Engel, deputy CEO of the SA Institute of Tax Practitioners.
He told Fin24 that had Gordhan announced an increase in value-added tax (VAT), it could have been used by President Jacob Zuma to oust him.
Gordhan is widely seen as being at loggerheads with Zuma, who has been mired in controversy relating to corruption scandals.
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"Had he raised VAT, that could have been the argument that Zuma used to throw him out," Engel said. "[H]e feels very threatened by the ANC elite so there was no way he was going to take on the unions by raising VAT."
South Africa’s VAT rate, which is somewhat lower than the global average, was introduced in 1991 at 10%. It was hiked to 14% in 1994.
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Currently, zero-rated items are brown bread, maize meal, samp, mealie rice, dried mealies, dried beans, lentils, tinned pilchards, milk, cultured milk, milk powder, dairy powder blend, rice, vegetables, fruit, vegetable oil, brown wheat meal, eggs and paraffin.
Engel said in his view, Gordhan came across "defensive" in his speech as he tried to create the perception that he is going after the rich and driving an empowerment agenda.
Engel said would have liked to see Gordhan cut back on the public wage bill and announce plans to help grow the economy.
"However, Gordhan is actually trapped. Where he would have wanted to see growth is also where he sees massive corruption."
He explained that ideally money should go to infrastructure, like the National Development Plan promised, but said the problem is that is also where the bulk of corruption is taking place.
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