VAT increase

This year's budget and especially the increase of VAT to 18 per cent might sound hard and cruel to people.

But the opposite is the fact! Considering the big drop in the cost of living (from 2.8 per cent to 1.1 per cent) with its weekly 75c compensation plus the Lm39 VAT increase compensation, the three percentage point VAT rise on everybody's basic expenditures is being covered very well.

The public's annual expenditure is around Lm700 million. Three per cent VAT out of that amounts to Lm21 million or Lm52.50 per capita per year.

The compensation of Lm39 covers about 75 per cent of this. You must not forget that the total public's annual expenditure includes everything - cars, travelling, other luxury articles, too.

Besides this you also must not forget that VAT on food and medicines remains zero. This proves that the VAT increase to 18 per cent does not affect most consumers. Deducting the government costs for the compensation (to government employees) the net increase from the VAT increase will amount to roughly Lm14 million, which will be allocated to the health account, so the public will benefit from it.

At the end it will be people who already spend a lot of money as well as other non-governmental employers who have to take the load of those Lm14 million.

But in comparison with other countries, this increase in the general costs is still much less than in most European countries.

I can say that the VAT increase, together with the compensation, is a genius and fair act.