A hike in the value-added tax (VAT) rate would be less distorting for the macroeconomy should the government need additional funds in future‚ than a rise in personal or corporate tax rates‚ the Davis Tax Committee has concluded‚ the newspaper reported.
The committee’s interim report on VAT‚ which was submitted to Finance Minister Nhlanhla Nene in December‚ was released on Tuesday for public comment.
Trade unions and civil society organisations are likely to oppose suggestions that the VAT rate be increased because of the effect of this on the poor.
The state would need significantly more tax revenue if and when it implements its national health insurance plan.
The report said that if the VAT rate — currently 14% — were raised for this or any other reason‚ the poor would have to be compensated‚ possibly by increases in social grants or with a better school nutrition programme.