South Africans were hit with the first sales tax hike since white rule on Wednesday as Finance Minister Malusi Gigaba announced a rise in Value Added Tax (VAT) on sales by 1 percentage point to 15 per cent. Delivering a tough budget, Gigaba said the increase, along with adjustments to income tax brackets, will raise $3 billion revenue in 2018-19. But The VAT hike may be risky for ANC ahead of 2019 elections as the country’s poor and black middle class voters are going to be affected. Gigaba dismissed such concerns saying the current zero-rating of basic food items will limit the impact on the poorest households. Rise in social grant benefit payments would to the poorest would further cushion the impact of VAT hike. Duty on luxury goods would rise 2 percentage points to 9% and duty on alcohol and tobacco products would rise between 6 percentage points and 10 per cent. The budget proposals have dampened the positive mood prevailing among South Africans after the new president Cyril Ramaphosa took office.
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