WILL VAT INCREASE?

 MBABANE – A serious cause for concern. The country’s businesses should brace themselves as they might dig deeper into their coffers following a proposed increase in Value Added Tax (VAT).

This is indirect tax that is levied on consumption goods and services in the country, and is also levied on the importation of goods and services into Eswatini. It is currently levied at the rate of 15 per cent.
With indications suggesting that South Africa’s Finance Minister Tito Mboweni might be the bearer of bad news by announcing a VAT hike next Wednesday, when he tables the 2020/21 budget, an increase in Eswatini is inevitable.

Eswatini Minister of Finance Neal Rijkenberg, speaking during the Central Bank of Eswatini (CBE) Post-Budget seminar at Happy Valley Resort in Ezulwini yesterday, highlighted the concern.

The reports were also published by South Africa’s Sunday World this past weekend as well as the Citizen yesterday. It is expected to increase by a per cent.
“There are rumours that South Africa might increase their VAT, so we will also effect an increase if that happens.

“We can’t be having a different VAT to South Africa due to trade agreements, so we will be also be forced to align ours with theirs,” he said.
Sunday World in the past week, quoted South Africa’s economists from PwC in a research note, saying that country’s government currently found itself  in a situation where it would likely be forced to raise revenue from one or more of the major taxes (corporate income tax, personal income tax and value added tax).

government

“On the basis that an increase in the rate of VAT will have the least harmful effect on the overall economy and its ability to raise substantial amounts of revenue with relatively small tax increases, it should be the preferred instrument for raising additional tax revenues.
“We estimate that an increase in the rate from 15 per cent  to 16 per cent will result in additional revenue of approximately R25 billion,” reported the South African publication.

An independent economist, who reacted to the possible increase on condition of anonymity, told this publication yesterday that even a one per cent increase would be bad news, as it would leave consumers worse off.

“It can be bad news as prices of basic commodities including electricity can shoot up while salaries remain stagnant,” said the seasoned economist.
Meanwhile, in the country, VAT was introduced on April 1, 2012 to replace Sales Tax.

While VAT can be bad news, on the flip side, it can provide potential for a stronger home manufacturing industry and more competitive export prices as direct exports are taxed at zero per cent.
The price of exports does not include any VAT which makes exports more competitive internationally.

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