#Budget2018

'Government had no choice but to increase VAT'

Chair of The Davis Tax Committee, Judge Dennis Davis says Finance Minister Malusi Gigaba had no choice but to increase VAT.

On Wednesday Gigaba announced the first VAT increase in over 20 years, from 14 to 15%.

Davis says it's necessary to make up for the estimated R48.2 billion revenue shortfall for the 2017-18 financial year.

Read: 'Next year they’re going to have to look at another VAT increase'

There was no choice if you look at the figures there is a R48.2 billion shortfall on revenue. The question is where are we going to get the money from?

Judge Dennis Davis, Chair of The Davis Tax Committee

We had to find the money, there was no option other than that, we have run out of options.

Judge Dennis Davis, Chair of The Davis Tax Committee

However, Davis says everything depends on how the money is spent.

There are so many demands and quite frankly, we have allowed certain things to get completely out of hand. The truth is that we will probably have consumption expenditure given wages for public service sector, which is too big an item given the amount of money we can have.

Judge Dennis Davis, Chair of The Davis Tax Committee

And of course corruption has created a huge problem. You can say what you like, but that was a factor which we need to take into account.

Judge Dennis Davis, Chair of The Davis Tax Committee

If we can get that under control, we can ensure that we are sensible about soaring increases and we can get a budget that is decisively progressive by next year.

Judge Dennis Davis, Chair of The Davis Tax Committee

Davis says he supports the call by President Cyril Ramaphosa for the establishment of a commission of inquiry into tax administration at Sars.

He says the main question is "Are we as efficient in our tax collection as we have been in the past?"

To hear more of this interview, listen below:


This article first appeared on CapeTalk : 'Government had no choice but to increase VAT'


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