What a Value-Added Tax increase could mean for SMEs


"The budget hammers the poor and is a legacy of Jacob Zuma's disastrous management of the economy of South Africa", said opposition Democratic Alliance's shadow finance minister Alf Lees.

Another alternative could have been raising personal income tax (particularly on the highest earners); increasing corporate income tax; and instituting an annual net wealth tax. "We therefore decided that increasing Value-Added Tax was unavoidable if we are to maintain the integrity of our public finances", said Gigaba.

With a budget shortfall of R50 billion and government juggling numbers to find R40 billion for free tertiary education, compounded by the economy only growing at an uneasy 1%, the finance ministry will need to resort to tax increases to try and balance the books, without increasing government debt.

These would include a continuation of the current zero-rating of basic food items such as maize meal, brown bread, dried beans and rice. Vulnerable households will also be compensated through an above average increase in social grants.

This is the second time he has mentioned the startup fund, the first being past year in October during the 2017 Medium Term Budget Policy Statement.

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"The 2017 GDP growth projection has been revised upward to 1%, which is higher than the 0.7% expected at the time of MTBPS [Medium Term Budget Policy Statement] a year ago".

"This review, which we expect to take a number of months, will be based on thorough analysis... the noisy ones on this side will also make your inputs...the views of stakeholders will be considered so South Africans understand the rationale for the decisions we are going to take in this regard", said President Cyril Ramaphosa. The R85-billion reduction in government expenditure over the next three years is funded by cuts at national level of R53-billion, but also reductions in the transfers to provinces and local government, R5.2-billion and R3.2-billion respectively. This is part of the Treasury's attempt to shrink its budget deficit, which stands at 4.3 percent of gross domestic product (GDP) in the 2017/18 fiscal year.

Consolidated spending would increase from R1,67 trillion in 2018/19 to R1,94 trillion over the medium term.

Gigaba said NSFAS funding for returning students would be converted into bursaries. "We are anticipating growth of 1.5% in 2018, rising to 2.1% in 2020", says Gigaba as he tabled the 2018 Budget in the National Assembly.

The so-called sin tax on alcohol and tobacco also increased by between 6 and 10 percentage points. Workers are not the ones who have looted Eskom, SAA and the state.