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Standard Bank Group
The SA Daily 20 February 2018

Tax hike options

Elna Moolman

  • We expect a package of tax hikes to include three elements – namely, some of the usual annual tax hikes such as higher “sin” taxes; some increases in taxes with broad reach across income groups such as higher fuel levies and fiscal drag; and possibly an element that is at least very progressive, but ideally concentrated on the high end of the income spectrum. We also see the probability of a company tax rate hike as reasonably low.
  • Prior to the announced free tertiary education proposal, we attached a very low probability to a VAT rate hike, but it is possible that a VAT rate hike might be put on the table as part of the negotiation when cabinet deliberates on the proposed free higher education proposal.
  • In this context, the need to increase the VAT rate to fund the proposed free education policy may be used as a bargaining tool to adjust some of the current specifications of such a policy. That said, we expect that it would be politically more palatable to increase the effective VAT rate by removing the existing zero rating on certain items than to increase the general VAT rate (see our report Budget preview of 18 February, by Elna Moolman).

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