Johannesburg – Raising the VAT rate could help Finance Minister Pravin Gordhan raise the R28bn tax revenue required to narrow the budget deficit, however it is unlikely he will use this option, said an economist.
Siphamandla Mkhwanazi, economist at Standard Bank, shared insights on the National Budget, to be delivered on Wednesday. He highlighted areas in which tax increases are expected.
Mkhwanazi said that although a VAT hike could generate the most revenue, it would exert pressure on low income consumers who are already under strain.
Low income consumers will be hardest hit as they allocate most of their revenue to food and beverages, said Mkhwanazi.
An increase in personal income tax is likely and this will impact middle income earners the most, he said. This is because middle income earners have the highest dependence on salaries and wages as a source of income.
However, improvements in corporate income tax collections would ease pressure on consumers, said Mkhwanazi.
WATCH: Chances of VAT hike slim - economist
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