South Africa’s social distress relief grant of R350 is set to expire in March, and calls are mounting for a permanent basic income grant to be introduced.
While politically unpopular, VAT is the likely candidate to fund the new grants as there is simply no more room to increase the personal income tax burden, says AJM tax director Pieter Janse van Rensburg.
“We already have two VAT rates, so it is theoretically possible to have 2-5 different rates depending on the types of goods or services purchased,” he said. “One of the hurdles is a lack of credibility to manage this, as well as the paucity of proper data to make these types of adjustments and then linking it back to a separate objective, like assisting work seekers. Realistically, it will also take 18 months to a year just to build that type of complex system. We can’t be basing decisions on poor data – the elephant in the room is corruption.”
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