Published: Thu, February 22, 2018
Research | By Jennifer Evans

VAT, fuel levy to increase

VAT, fuel levy to increase

As Finance Minister Malusi Gigaba prepared to give his maiden Budget speech in the National Assembly on Wednesday afternoon, new information about Gigaba's tenure as Home Affairs Minister emerged.

"Under the present hard circumstance, it is a fair budget that seeks to fairly distribute the hardships that now face us as a country", The Banking Association South Africa said.

The Public Servants Association, which represents hundreds of thousands of public-sector employees said it was concerned about the detrimental, ripple effect on especially middle- and low-income earners of the Value-Added Tax increase and a 52-cents increase on the fuel levy. "It is hard to consult about taxes prior to the Budget because we don't want not to take the decision", said Gigaba, adding that it was important to note the basket of zero-rated food remained to protect poor households.

Money also was found for the above inflation increases in social grants.

This is the second time he has mentioned the startup fund, the first being past year in October during the 2017 Medium Term Budget Policy Statement.

Moody's said it would make a ratings decision after the budget announcement.

However, buried in the budget review document was the cyanide in the punch: cuts to other education programmes in the medium term, including goods and services. This is part of the Treasury's attempt to shrink its budget deficit, which stands at 4.3 percent of gross domestic product (GDP) in the 2017/18 fiscal year.

It also revised its projection of GDP growth for 2017 to 1 percent, up from the previous 0.7 percent figure.

"The 2017 Gross Domestic Product (GDP) growth projection has been revised upward to 1 percent, which is higher than the 0.7 percent expected at the time of the Medium Term Budget Policy Statement (MTBPS) a year ago", Malusi Gigaba said while presenting the budget in parliament.

The budget's proposals to generate an additional 36 billion rand in tax revenue will be essential to fund free university education for students from low-income families - a policy abruptly announced by Zuma on the eve of his departure from the ANC presidency previous year. Returning students would have loans converted to non-repayable bursaries, said Gigaba: "This is an important step in breaking the cycle of poverty and confronting youth unemployment". Government stands ready to provide financial assistance where necessary: "a provisional allocation of R6 billion has been set aside in 2018/19 for several purposes, including drought relief and to augment public infrastructure investment". Workers are not the ones who have looted Eskom, SAA and the state.

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