21/02/2018 13:56 SAST | Updated 21/02/2018 14:08 SAST

Fact-Check: The Poor Won't Pay The Most For The VAT Increase

Budget 2018 is a Robin Hood budget which takes from the rich to give to the government.

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There's a lot of bitter medicine for you to swallow in this year's Budget and the increase in VAT is probably the worst.

Value-added tax, the one you pay at shop tills, is going up by one percentage point to 15%. It's a lot, but it's still less than most other countries with VAT regimes.

Brazil, India and China all levy higher VAT than South Africa does. Most other African countries do too although neighbouring Botswana and the other African super-power, Nigeria, charge their citizens less value added tax.

Trade unions and civil society say that VAT impacts the poor worst, but Finance Minister Malusi Gigaba says this is not true. "The wealthiest 30 percent of households contribute 85 percent of VAT revenue."


There are 19 basic food items that are zero-rated in that there is no VAT levied on it – these include dried beans, samp, mealie-meal and rice. "Even though the zero-rated items are mostly well targeted, there are a few food items, such as fruit, where higher-income households reap most of the benefits," reads the 2018 Budget Review.

The Treasury says the Budget is pro-poor in that government ensured that all grants grow by more than inflation. The old pension and disability grants increase to R1,695/month and the child support grant increases to R405/month. Only the foster care grant grows by less than the inflation rate from R920/month to R960/month. In addition, the R56-billion set aside for free fee tertiary education for households with an annual income of R350,000 and under a year is also a pro-poor subsidy, Treasury officials told HuffPost SA.

Government considered a dual VAT structure with a higher rate on luxury goods, but in the end it chose to hike what are called ad valorem excise duties. This is in line with a Budget that targets the wealthy and luxury lovers.

If you like cosmetics, play golf and enjoy your gadgets, get ready to pay more for them. And if you are a car nut, the excise duties on cars is going up from 25 percent to 30 percent.

"The classification of cellular telephones will be updated to include "smartphones" to ensure they attract ad volorem duties. "Government will also consult on a proposal to replace the flat rate for cellphones with a progressive rate structure based on the value of the phone."