South Africa: Put Down the Hammer - Govt Must Urgently Lower VAT to Save the Economy

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opinion

Businesses in South Africa need rapid relief - as do consumers - and yet issues around tax rates were not thoroughly dealt with in the Adjustment Budget. It is critical that government begins rethinking the VAT rate and other corporate taxes immediately.

If all you have is a hammer, then you begin to treat everything as if it is a nail. This phrase was coined by psychologist Abraham Maslow to describe how cognitive bias can often lead one to rely too heavily on a familiar tool.

It is an apt way to describe how the government has approached thinking about containing the spread of Covid-19. Indeed, it is clear that the government only seems to have a single tool when it comes to its policy thinking about responding to the pandemic. That tool primarily revolves around some form of lockdown.

From a policy perspective, this is incredibly worrying because essentially you have a state apparatus which is trapped in this mode of thinking. Thus, as the government encounters challenges, it cannot think any further than merely implementing the harshest and most restrictive forms of intervention without any form of self-reflection or interrogation of their effectiveness and impact.

Bringing the hammer...

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