South Africa has experienced a sharp increase in the volume of freight moved in the first quarter of 2018, particularly in March, as people try to source goods ahead of the scheduled 1% VAT increase.
“The shops at the end of March are likely to be quite full, with lots of non-perishable goods in surplus,” economist Mike Schüssler told FTW.
The stronger rand has also played a role in first quarter imports. “It’s going to be a strong first quarter, with the second quarter being far weaker – possibly even negative – in some spheres.
“The sugar tax looms large and so there are likely to be significant specials offered by the major retailers on items like soft drinks. Pricier vehicles are also going to be taxed at higher rates and fuel price hikes still have to come into play, so consumers are going to be hit hard,” he warned.
While there is no chance the decision to raise VAT will be reversed, Schüssler believes that certain items, like chicken, may become VAT-free – if enough political pressure is applied. He said VAT could still be added to the fuel price in place of the current fuel tax, customs tax and RAF levy, although this idea has seemingly been put on ice, most likely to return in 2019.
“People will still buy fruit and vegetables and basic commodities. But those transporters delivering non-perishables are a lot busier now than they are going to be in the months to come,” he said. “Manufacturers and retailers are going to continue to squeeze transporters.”
Overall, South Africa is one of the highest taxed countries in the world. Personal income tax and company tax as a burden to GDP are among the highest (ranking SA in the top five for company tax rates and in the top 10 for personal income tax rates) in the world. These tax rates have continued to increase, while North America’s are currently decreasing. Germany’s have already decreased.
Our taxes on goods and services are averagely placed from a global perspective and we have a highly progressive tax system. Schüssler believes the removal of Tom Moyane as head of SA Revenue Service will make a difference, albeit over the longer term. “While the economy is doing better overall, making up the R48 billion in lost revenue will not take place quickly,” he said.
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Overall, South Africa is one of the highest taxed countries in the world. – Mike Schüssler
