Minister of Finance Malusi Gigaba making his 2018 budget speech in Parliament. Picture :Phando Jikelo/African News Agency/ANA

Johannesburg - Consumers must prepare to cough out more from their pocket to afford food and petrol.

Finance Minister Malusi Gigaba has announced increases in the Value Added Tax and income tax as part of efforts to raise a budget shortfall which remains at R 48,2 billion hole in its budget and increase revenue.

Gigaba was delivering his maiden Budget Speech in Parliament.

Government was expecting to collect R1,345 trillion in 2018/19 financial year, which was not going to be enough to cover all expenses. An additional R191 billion would need to be borrowed.

The increase in VAT and personal income tax was meant to raise R36 billion. Cabinet has approved expenditure cuts of R85 billion, but these were not outlined in Gigaba's budget speech.

The tax increases that will hit your pocket also include a 52 cents per litre increase in the levies on fuel, made up of a 22 cents per litre for the general fuel levy and a 30 cents per litre increase in the Road Accident Fund Levy and increases in the alcohol and tobacco excise duties of between 6 and 10 per cent.

On Wednesday Cosatu, SACP and the EFF warned against government increasing VAT and income tax to raise tax revenue and make up for the shortfall in budget, arguing that this would hurt the poor while absolving government and private sector.

They called for wealth tax for the rich and government to cut down the executive Cabinets from national to local level to raise money.
Gigaba, in a speech he described as tough but hopeful said raising, VAT was unavoidable.

"We have increased personal income tax significantly in recent years, particularly at the higher income bands, and our corporate tax is high by international standards."

We have not adjusted VAT since 1993, and it is low compared to some of our peers," he said.

Vulnerable households would be cushioned through the increase in social grants and some relief would be provided for lower income individuals through an increase in the bottom three personal income tax brackets and the rebates, Gigaba said.

"In addition to VAT, we are increasing excise duties on luxury goods and estate duty on wealthy individuals," Gigaba said.

The country's economic outlook had improved over the past few months due to growth in agriculture and recovery in investor and business confidence.

Government was anticipating a growth of 1,5 percent in 2018, rising to 2,1 in 2020, significantly below the 5% envisaged in the National Development Plan.

Political Bureau