Timothy Rangongo , Business Insider SA
• 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.
So will South Africa be paying too much in VAT?
As it turns out…
The hike could actually be justified as our VAT rate is lower compared to the rest of Africa. So, they could have gone with a 2% increase but probably decided against it when factoring in its impact on the poor.
Severus Smuts, Indirect tax specialist at Deloitte
The 15% VAT South Africans will have to pay from 1 April, is mild compared to the rest of the world.
Global VAT rates
• 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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