Abolish the VAT threshold

Reimagine compliance system by leveraging modern technology.

- Tebogo Khaas

South Africans await Finance Minister Enoch Godongwana's second attempt at presenting the national budget following his initial proposal's rejection due to plans to hike the value-added tax (VAT) rate. Pundits have weighed in on how best to navigate fiscal constraints and the impact any VAT increase would have on low- and middle-income households.

Should Godongwana reverse his initial plans to raise VAT, alternative tax hikes would be necessary to fund, among others, the National Health Insurance (NHI), which is expected to place significant strain on the fiscus.

Additionally, the social relief of distress (SRD) grant, introduced during the Covid pandemic to support those without income or access to other state grants, is set to increase, following a recent court ruling.

This has sharpened calls for the government to raise more revenue by improving efficiencies and closing loopholes in the current tax system. Billions in tax revenue are lost due to weak controls in excise duty and VAT collections.

Investing in the SA Revenue Service (Sars) to enhance its capacity to address these issues is, therefore, a logical step.

One of the key policy discussions gaining traction is the call to scrap the VAT registration threshold. In other words, all registered and trading enterprises must pay VAT.