Finance Minister Nhlanhla Nene says that government is prepared to look at alternative ways to raise revenue other than VAT but these will take time to implement.
Nene was responding to debate on the fiscal framework in Parliament on Wednesday night.
He told Members of Parliament the one percentage point increase in the VAT rate was the toughest proposal in the budget tabled by his predecessor, Malusi Gigaba.
But he says it’s necessary if government is going to raise revenue and contain debt.
Government is aiming to reduce expenditure by R26 billion in this financial year while raising R23 billion in revenue through an unpopular decision to raise VAT rate to 15%.
Nene says alternative proposals will not raise the revenue needed to close the fiscal gap.
“But given that VAT raise will give in more revenue, it’ll have an impact on the cost of living of all households, including poor households.”
Nene has committed to expanding the basket of 19 zero-rated food items to cushion the blow of the increase.
He says that government must now deal with corruption in earnest so that the poor can know that the revenue collected from them is to their benefit.