Supplementary Budget 2020

WATCH: Why Gordhan won't raise VAT

Siphamandla Mkhwanazi, Standard Bank economist.
Siphamandla Mkhwanazi, Standard Bank economist.

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


* Visit our Budget Special for all the budget news and in-depth analysis.

Read Fin24's top stories trending on Twitter:

ZAR/USD
16.77
(-0.03)
ZAR/GBP
21.15
(-0.12)
ZAR/EUR
18.95
(-0.03)
ZAR/AUD
11.66
(-0.03)
ZAR/JPY
0.16
(-0.09)
Gold
1798.22
(+0.06)
Silver
18.69
(+0.13)
Platinum
824.50
(+0.30)
Brent Crude
43.14
(+2.10)
Palladium
1961.36
(+0.61)
All Share
55417.89
(-0.66)
Top 40
51154.08
(-0.74)
Financial 15
10472.31
(+1.28)
Industrial 25
76134.69
(-1.67)
Resource 10
52483.78
(-0.20)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1959 votes
I am taking a hit, but should be able to recover in the next year
23% - 2565 votes
My finances have been devastated
34% - 3816 votes
It's still too early to know what the full effect will be
25% - 2746 votes
Vote