South African low income and middle class households are facing tough times following the recent announcement of various tax increases.
Former Finance Minister Malusi Gigaba announced an increase in VAT, fuel levies and personal income tax, among others. He said the purpose is to strengthen the country’s fiscal position.
Widespread trade union and NGO demonstrations is a result of Gigaba’s proposals of various tax increases.
The organisations blame government for punishing the poor and the working class for the sins of the rich.
Experts say the only way to survive these economic hardships is to manage one’s finances prudently.
“I suppose a good advice will be that individuals must start consolidating their debts so you have to try and manage that,” says Andrew Coutts of Santam.
Although trade unions are unwilling to accept government’s explanation for increasing VAT and personal income tax in particular, experts say the government had no choice.
It is facing close to a R50 billion revenue shortfall while at the same time it is obliged to reverse the current unsustainable fiscal trends.
“Personal income tax represents only 13% with only 13% payers in our country who pay personal income tax to the fuel levy, so already that’s been heavily taxed,” he adds.
However, trade unions and other groups insist VAT should either be scrapped or delayed until further consultations.
The Treasury promised to appoint a panel of experts to look at zero-rating other food items that are likely to cushion the working class from the difficulties emanating from VAT hikes.
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