Deputy finance minister makes the case for VAT increase

Raising VAT is the easiest way to plug the hole in the fiscus‚ according to Deputy Finance Minister Mondli Gungubele.

“We had to move right into tax and work very carefully within that area. VAT was the easiest way to deal with those problems and will bring in no less than R36-billion‚” he said at a business breakfast in Sandton on Thursday.

Gungubele said Treasury had to acknowledge the picture painted by the medium-term budget policy statement‚ including rocketing debt‚ despite soaring investor confidence and an improved economic performance.

“This called for a special intervention in our budget this year‚ which forced us as government to respond to certain measures‚” he said.

He added that there was a focus on cutting expenditure and investing in education.

“The graduate sector has around 3% unemployment. If you invest there you will see a net benefit of contribution to tax revenue.”

Treasury would tread carefully with corporate tax and believed that collaboration between the public and private sectors was of critical importance‚ he said.

“We must not do anything that must undermine this partnership. We don’t have much going forward in dealing with socio-economic uncertainty without the private sector.”

The role could be further supported by improved economic growth and investor sentiment‚ he said.

Last week‚ Treasury and business officials went on an investor road show in the UK and the US. Echoing Finance Minister Nhlanhla Nene‚ Gungubele said the interrogation by investors was positive‚ although there was pressure to answer tough questions‚ particularly on state-owned entities.

“Importantly‚ they saw South Africa as one of the strategic countries in the continent.”