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Despite politics, South Africa’s government probably has no choice but to hike the VAT (Value Added Tax) rate to 16% in its 2020 Budget on 26 February, according to Absa.

Treasury increased the VAT rate to 15% (from 14%) on 31 March 2018.

Consumers will almost certainly also have to contend with yet another hike in the fuel levy.

In our forecast, we have assumed that the government will raise the general fuel levy by 30 cents/litre. But more importantly, we expect the government to increase the VAT rate by 1 percentage point to 16% in the 2020 Budget…

Absa

… Our call of a VAT hike is perhaps a bold one, given the likely political fallout, but it is difficult to see what other options the government has…

Absa

On the positive side, the bank expects the ongoing rehabilitation of the South African Revenue Service (Sars) to boost revenues in the longer term.

For more detail, read “Absa warns that the government may have to hike VAT” [Business Day] and “Shock tax hike coming for South Africans in April, economists warn” [BusinessTech].

This article first appeared on CapeTalk : Punch-drunk consumers should brace themselves for a VAT hike

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