- Value added tax (VAT) was increased by one percentage point to 15%.
- The hike was met with heavy criticism by businesses, consumers and the opposition.
- South Africa's VAT rate is still relatively low compared to the rest of Africa and the world.
It didn't take long for the DA to launch a full-on offensive at the planned one percentage point increase in VAT, complete with an online petition.
[WATCH] #DA's #Maimane says if Nkandla wasn't built, VAT wouldn't need to be increased. Courtesy #DStv403 pic.twitter.com/9crSueUuLP
— eNCA (@eNCA) February 24, 2018
For the DA at least, the move by the new Ramaphosa administration to offset the impact of the VAT increase by expanding the list zero-rated and tax-free items was not enough.
So will South Africa be paying too much in VAT?
As it turns out...
The 15% VAT South Africans will have to pay from 1 April, is mild compared to the rest of the world.
- Djibouti 33%
- Hungary 27%
- Croatia 25%
- Portugal 23%
- Italy 22%
- Argentina 21%
- Nigeria 19%
- Burundi 18%
- China 17%
- Kenya 16%
But there is a catch.
In their latest research looking into the ease of paying taxes in 190 economies, PwC and the World Bank report that Djibouti, Nigeria, Burundi and Kenya (with VAT rates among the highest on the continent) have a combined paltry total tax contribution rate of 37.85%.
That is almost one tenth less than the regional average.
A range of statistics also suggest that Hungary, Croatia, Portugal, and Italy have low levels of compliance with tax obligations even compared to their immediate neighbours.
And countries that struggle to get tax paid tend to hike up their easier-to-police VAT rates.
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