VAT - the poor to be buffered

Government is ensuring that it protects the country’s most vulnerable during these tough economic times.

The effect of an increase in VAT to 15 percent from 14 percent is going to be buffered by South Africa's high level of social services. That's according to Finance Minister Malusi Gigaba who says the increase, which takes effect on 1 April, will also see South Africans enjoy greater relief from below inflation increases in personal income tax rebates and brackets, and steps government is taking towards free higher education.

From 1 April 2018 old-age disability grants will increase from R1 600 to R1 690 and to R1 700 in October. Child support grants will increase from R380 to R400 in April, and to R410 in October.

This is a 6.6 percent annual increase. Since October 2017’s Medium-Term Budget an additional R2.6 billion has been added to social grants to enable these increases.
 


“As highlighted by the President in the State of the Nation Address, government will ensure that social grants will continue to be paid without disruption,” said Minister Gigaba.

In its budget review, National Treasury said expenditure on social protection provides social security and a safety net for low-income South Africans.

 It also improves social welfare service delivery to vulnerable individuals through policy and legislative reform, growing the number of social workers, improving access to Early Childhood Development and facilitating food and nutrition initiatives.

“Spending on social protection is set to rise from R193.4 billion in 2018/19 to R223.9 billion by 2020/21, growing by an average of 7.9 percent. The number of social grant beneficiaries is expected to reach 18.1 million by the end of 2020/21.”

An estimated 12.8 million people will receive the child support grant and 3.7 million people will receive the old-age grant.

2018 Tax proposals

• An increase in value-added tax (VAT) from 14 to 15 percent, effective 1 April 2018.
• A below inflation increase in personal income tax rebates and brackets, with greater relief for those in the lower income tax brackets.
• A 52 cent per litre increase in the levies on fuel, made up of 22 cents per litre for the general fuel levy and 30 cents in the Road Accident Fund levy.
• Increases in alcohol and tobacco excise duties of between 6 and 10 percent.          

A move towards fee-free education

Minister Gigaba said government will spend about R57 billion on fee-free higher education over the next three years.

“The largest reallocation of resources towards government’s priorities was on higher education and training, amounting to additional funding of R57 billion over the medium term. As a result, this is the fastest-growing spending category, with an annual average growth of 13.7 percent,” he said. 

Government will phase in fee-free higher education and training to students from poor and working-class families.

This means that all new first-year students, with a family income below R350 000 per annum, at universities and technical vocational education and training colleges in 2018 will be funded for the full cost of their studies.

Returning National Student Financial Aid Scheme students at universities will also have their loans, for 2018 and going forward, converted to
bursaries.