Minister of Finance Malusi Gigaba is preparing to deliver what economists say is the toughest budget speech in years.
Chief economist at Stanlib Kevin Lings says government might be tempted to increase VAT because it would bring a sizable income to Treasury and help with the deficit.
Lings says government is currently facing a huge revenue shortfall of over R50 billion which it must cover.
[With] increased taxes in the country, including VAT then generally you would expect higher wage demands.— Kevin Lings, Chief Economist at Stanlib
Lings says VAT increase could bring a revenue of R15 billion to R20 billion which is good but has social consequences. He suggests that the minister could look at expenditure control or reduction to have lesser tax hikes.
There is a lot at stake here, the question is though how does government try and close this deficit? From our perspective, it would be welcome if there were significant expenditure reductions.— Kevin Lings, Chief Economist at Stanlib
Listen to some taxes that might push an inflation hike: