Budget Speech: Some economists believe VAT increase still possible

JOHANNESBURG: Minister of Finance Enoch Godongwana will have a second go at tabling his Budget Speech on Wednesday as Government of National Unity (GNU) parties are having last-minute discussions on what should be included.  

Godongwana's budget was rejected in February due to a proposed  twopercentage point increase in value-added tax (VAT).  

ALSO READ:

- Facilities for abused women and children bracing for devastating consequences if VAT hiked - National Shelter Movement

- BOSA claims to have identified R76 billion 'to plug fiscal hole' ahead of Budget Speech

- Financial and Fiscal Commission questions SA budget process, wants to be more involved

Some within the GNU have refused the increase, raising concerns about the burden on households.  

But some economists believe an increase in VAT could still be on the cards.  

In the short term, several scenarios for tax increases are proposed based on the net increase in spending.  

Given that a two percentage point VAT increase is unlikely to be enacted, economists have touted a few possibilities to raise additional revenue.  

At the top of the list is a 0.75 percentage point increase, which could generate R22 billion.  

Add that to a potential fuel levy increase of R4 billion and bracket creep, then the budget could get by with a R40 billion spending increase.  

On the lower end, a 0.5 percentage point increase in VAT would generate an additional R15 billion.  

Despite calls from some political parties and unions, economists said an increase in corporate income tax and wealth tax is considered highly unlikely.