Govt hikes VAT...the reaction

Yesterday, Finance and Development Minister, Kenneth Matambo, announced that VAT would increase from the current 10 percent with effect from April 01, 2010. Matambo said the decision was informed by the need to boost the national purse, in the face of lower revenues from minerals, the Southern African Customs Union and the higher deficit projected to be P12.11 billion for 2010/11. However, the Minister also increased the VAT registration threshold to P500,000, providing relief to small, micro and medium enterprises.

Introduced in 2002, VAT is a levied indirect tax, which is not regarded as a business expense as it is borne by the consumer. VAT has been pegged at 10 percent since its introduction.