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Ramaphosa Tax Gamble Targets Debt Before South African Vote

  • Finance Minister Malusi Gigaba raises sales-tax rate to 15%
  • Targeting VAT could backfire on ruling party as vote looms
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Finance Minister Malusi Gigaba talks with Bloomberg about South Africa’s economic priorities and the rand.Source: Bloomberg
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South Africa’s new president, Cyril Ramaphosa, risks alienating voters in the run-up to next year’s elections after his administration announced plans to raise sales tax and curb spending as it seeks to stabilize debt and prevent a third junk credit rating.

The value-added tax rate will be raised to 15 percent from 14 percent, the first time since the end of apartheid that the government has targeted a charge seen as hitting the poor hardest. Levies on fuel and luxury goods will also go up, while planned spending will be cut over the next three years, according to Finance Minister Malusi Gigaba. The rand and government bonds gained.