VAT rate rise ‘not desirable’, but ‘unavoidable’ to rebuild public finance integrity

Finance Minister Malusi Gigaba confirmed the much-anticipated increase in the value-added tax (VAT) rate from 14% to 15% in his maiden Budget speech to Parliament on Wednesday, describing the increase as “unavoidable if we are to maintain the integrity of our public finances”. The hike was announced amid a R48.2-billion revenue shortfall for 2017/18, against a gross tax revenue estimate of R1.27-trillion. While slightly lower than the R50.8-billion projected in the 2017 Medium-Term Budget Policy Statement, the revenue gap was substantially higher than the R30.7-billion reported in 2016/17.