ANC's Mbalula says if economy improves, VAT can be reduced

JOHANNESBURG - The African National Congress (ANC) said if the economy improved, government could take the unprecedented step of reducing value-added tax.

From 1 May, VAT will be increased for the fourth time in the country’s history by 0.5 percentage points.

The Value-Added Tax Act was first introduced to South Africa in 1991 at ten percent.

It was increased to 14% in 1993, then 15% in 2018, however, it has never dropped.

Speaking at a media briefing on Tuesday, ANC Secretary-General Fikile Mbalula said the VAT hike doesn’t have to be permanent.

"Right from the onset when Treasury came up with 2% [VAT hike], we did not agree but we ran out of options in terms of what we need to do except to cushion us, to have a zero percent intervention which is not permanent. As our economic situation is perfected, this zero percent is not permanent, it will be withdrawn."

Economist, Dr Dale McKinley, said that Mbalula's comments were more political than realistic government policy.

"Of course it's absolutely possible. Budgets are produced every year, so one can take away VAT, increase VAT and make proposals anyway, whether they fly... I think, though, this is part of the negotiations gambit where they're basically trying to get the DA on board and say come with us with a 0.5% increase in the next two years we will do away with it, that kind of thing. My sense is it's possible but unlikely."