VAT increase to affect poor households: Economist

Economist Davie Roodt says the VAT increase and the sugar tax will affect the middle class and poor households the most.

Government is, however considering adding more basic food items to the list of goods that will be zero rated for VAT.

Roodt says these taxes will also have a negative impact on inflation numbers – which have been below the Reserve Bank’s target band of between 3% and 6%.

“Mostly bad news, but a little bit of good news and offcourse the Reserve Bank decided to cut interest rates by 25 basis points, but for the rest – prices are mostly going to go up because of the increase in VAT and also because of the increase in fuel price and the sugar tax. Based on my calculations, inflation will go up by roughly by 50 basis points and half a percent and if it wasn’t for the strength of the currency, inflation would have gone up a bit more.”