S Africa raises VAT for first time in 25 years

CAPE TOWN: South Africa will in April implement its first value-added tax (VAT) hike since the dawn of democracy over two decades ago, the Treasury said yesterday, part of efforts to cut the budget deficit and

stabilize debt under new President Cyril Ramaphosa.

The government of Africa’s most industrialized country wants to plug a revenue hole in its budget and repair its economy after nine years of mismanagement under Jacob Zuma, who resigned as president this month on orders of the ruling African National Congress following a series of scandals.

Zuma has denied all wrongdoing. Raising VAT is potentially unpopular ahead of a national election next year but will generate an additional 23 billion

rand ($2 billion) of revenue in 2018/19 as the economy recovers from a recession last year.

Unchanged since 1993, the South African VAT rate would increase to 15 percent from 14 percent effective April 1, the Treasury said in a document laying out its budget plans for the next three years.

Raising VAT is less harmful to economic growth than raising other taxes, the Treasury said. “This is a tough, but hopeful budget,” Finance Minister Malusi Gigaba said. — Reuters