What Effect Does the Increase of VAT have on South Africa?

Since South Africa has taken on a new president, Cyril Ramaphosa, one of the first decisions on his behalf, is to increase the VAT for the first time in 25 years. Given that Apartheid ended about 25 years ago, makes it quite a big deal for most residents living in the country. It was increased from the very famous 14% to 15% on the 1st of April 2018, for the reason to cover whatever shortfall the country has experienced in the last few years.

With a big gap in the country’s finances, which makes up about R48 billion, the tax increase is hoped to fill at least some part thereof, which even though it’s not as supported, is still a valid reason for increasing the VAT.

For the average South African taxpayer or rather those who fall below the breadline, this means that they will suffer even more, because of their financial shortfall, which is just one reason why some do not support it.

There are a few items, however that won’t be increased, which are referred to as “zero-rated items”. These items’ tax will not be increased, to help the average or less than average South African earner to be able to afford the necessary food items.

Zero-rated Food Items

These items include the following:

  • Rice
  • Brown bread
  • Mealie-Meal
  • Brown wheaten meal
  • Dried Mealies
  • Dried beans
  • Lentils
  • Samp
  • Vegetable oil
  • Eggs
  • Milk
  • Dairy powder blend
  • Powdered milk
  • Tinned pilchards
  • Vegetables
  • Fresh fruits

What products are not exempt from the increase in VAT?

Products that aren’t exempt from the tax increase include clothing, cleaning products or household products, as well as other food products not mentioned in the zero-rated food items. Since every person still requires these products, each household will still be suffering somehow.

1% increased in tax might sound completely silly, yet it adds up at the end of the day and has an even greater effect on those who struggle to get by in South Africa.

Get debt counselling and debt review help from Credit Matters. Call us today! 086 111 6197