Economists: VAT increase will hit consumers hard

Some economists have advised that consumers turn to food items which have zero vat implications.

Picture: Supplied.

JOHANNESBURG - Economists say the value added tax (VAT) increase from 14% to 15%, which takes effect from 1 April, is going to hurt the pockets of all consumers.

Some economists have advised that consumers turn to food items which have zero vat implications.

This is the first vat increase in 25 years aimed at raising an extra R36 billion this financial year.

Senior tax lecturer at the University of Johannesburg Muneer Hassan says considering the combination of the fuel price increase this month along with the vat hike, the net spend of consumers will be negatively impacted.

“The VAT increase is going to hurt us quite badly. We’re basically getting a double whammy.”

Head of research at ETM Analytics George Glynos notes that perhaps a different approach could have been considered.

“When you see the Auditor-General’s report on wastage of about R50 billion and you know the VAT increase raises about R22 billion, you realise a different approach could have been adopted.”

However, Hassan says considering that investor confidence has increased, the country's economy still has a positive outlook.

(Edited by Shimoney Regter)