WATCH: Economist cautions against VAT rate hike

2017-02-21 19:35

Cape Town - If government were to increase the VAT rate, they would need to be very careful, and do exclusion and zero ratings on the products that the poor do buy. So says economist Arthur Kamp in an interview with Fin24.

He said in comparing tax rates across developed and developing countries, it is evident that South Africa's VAT rate is relatively low, with a high personal income tax rate.

That being said, Kamp does not think that there is going to be an increase in the vat rate. “I don’t think that all stakeholders will agree to an increase in VAT. It could work if there was some way that one could ring-fence the revenue increase and put that back into the socio-economic needs. That inevitably doesn’t happen, as there is one pool that it all goes into.”

Kamp predicts that this budget is going to focus more on income tax, sugar tax, fuel levy and sin taxes.

“Without an increase in the VAT rate - it is almost inevitable that you have to increase personal income tax”

* Visit our Budget Special for all the budget news and in-depth analysis.

Read Fin24's top stories trending on Twitter: