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The Salvation Army has welcomed the higher than inflation increase in social grants announced in yesterday’s budget. However, the Church fears that this good news will be offset by the increase in VAT from 14% to 15%.

Responding to the budget speech, the Territorial Commander of The Salvation Army, Colonel Keith Conrad said he feared that the poor of South Africa in particularly will be negatively impacted by the hike in VAT, and that the increases in the various types of social grants will be insufficient to counteract its effect.

“Even though nineteen basic food stuffs are zero-rated, and therefore not subject to a VAT charge, the VAT increase will have a knock-on effect throughout the economy, and it will be the poor who have the least capacity to absorb the shock,” he added.

“Officials of the National Treasury are quoted as saying that the ability to raise the corporate tax is limited in the light of global competition. This is an open admission that the resources to balance the budget is going to come from the person in the street, in the form of the VAT and the fuel levy increases, amongst other aspects,” Colonel Conrad said.

“Raising VAT may well be less harmful to growth than raising other taxes in the view of the National Treasury, but the short-term effect will be even more suffering among the poor than we are already seeing,” he said.

Issued by Salvation Army