Mid-term budget lays ground for rise from current 15%
The South African Finance Ministry’s mid-term budget indicates a fund gap likely to be filled by a VAT rise in next year’s 2024 budget. Most government departments expect to run out of money by March 2024.
The Mid-term budget documents show deficit of R15 billion needing to be raised. The government’s spending plans have been undermined by a fall in many commodities’ prices and duties. 2023 Corporate tax revenues are also down; VAT refunds up against budget. Economic growth has been disappointing, too.
Fitch, the rating agency, stated that risk that the government fails to meet its ambitious fiscal targets is significant, with wage cost control set to be particularly challenging.
In submitting his mid-term budget to Parliament, Finance Minister Enoch Godongwana was clear that the gap will need to be filled.
The Treasury has been reported as proposing a 1% or 2% rise to plug the gap.
South Africa’s 15% VAT rate typical for the region:
- 15% Namibia
- 12% Botswana
- 15% Zimbabwe
- 16% Mozambique
