Finance Minister Enoch Godongwana. (Dwayne Senior/Bloomberg via Getty Images)
Political parties in parliament were divided over the budget speech delivered by Finance Minister Enoch Godongwana on Wednesday, with the Democratic Alliance (DA) adamant it would not support a proposed one percentage point VAT increase staggered over two years.
Godongwana compromised on his initial plans for a two percentage point hike in VAT after an outcry on 19 February from coalition government partners who said it was too high.
The DA, unions and other opposition parties including the Economic Freedom Fighters (EFF), as well as labour federation Cosatu have been adamant that they will not accept any VAT increase.
Speaking after Godongwana’s speech, DA leader John Steenhuisen said the party would not support the budget because it would hit the pockets of South Africans.
“The ANC has once again insisted on a budget with not one, but two VAT increases, which cumulatively will increase VAT by 1% over the next two years. This act by the ANC will make the people of South Africa poorer. Food prices will rise, and the future of the government is at risk,” he said.
He added that the DA had made it clear to the ANC that “Strong growth measures that lead to more jobs, higher living standards, and tax cuts over the next three years are what our country needs.”
Steenhuisen said the budget would struggle to be passed because the ANC does not have a majority in parliament, adding: “The ANC created this mess — it must fix it, but it cannot do so without us.”
The first part of the proposed VAT increase would take effect on 1 May, while next year’s half a percentage point hike is set for 1 April. The increases are expected to generate R13.5 billion in tax revenue for 2025-26, R30 billion in 2026-27, and R32 billion in 2027-28.
Cosatu’s parliamentary coordinator, Matthew Parks, said the federation would reject the budget, criticising what he called its reliance on an “unnecessary 0.5% VAT hike over the next two years as a primary funding source”.
He added that the failure to adjust personal income tax brackets for 2025 would be a painful blow to millions of highly indebted working-class families and an already battered economy.
“VAT is regressive and hurts the poor who already cannot afford to buy essential foods, electricity or transport. The decision not to adjust tax brackets for low- and middle-income workers is not acceptable when they are already drowning in debt with their meagre wages not keeping pace with inflation,” Parks said.
ActionSA MP Alan Beesley criticised the government’s justification for the tax hikes, arguing that although officials say the increases will fund above-inflation social grant adjustments, VAT zero-rated food items and fuel levy relief, these measures should instead be financed by cutting wasteful spending.
He pointed to what he called redundant deputy minister positions and failing government programmes as areas where savings could be made.
“The truth is that ordinary citizens are being forced to pay for government failures, while those responsible for looting the state face no consequences,” Beesley said.
The EFF said the finance minister’s fiscal strategy was “reckless and blatantly disregards the realities faced by the poor and working class”.
The party added: “MPs, regardless of party affiliation, must go beyond rejecting the tabled budget and empower the standing committee on finance to revise the proposed fiscal framework and revenue measures.”
Going against the trend, the Good party, a GNU partner, said it would support the budget on the basis that the VAT increase had been reduced while increased social, education and infrastructure spending proposed in the rejected first iteration of the budget had been retained.
Secretary general Brett Herron added that Good would back the budget because Godongwana had not cancelled the R370 a month social relief of distress grant introduced during Covid-19 five years ago, despite reportedly suggesting recently that this may be necessary to avoid a two percentage point VAT increase.
Rise Mzansi leader Songezo Zibi said the party would wait to study the budget thoroughly to understand where the money would come from.
“We must look at this budget holistically to see whether there are other proposals in the budget that are cause for concern,” he said.
Build One South Africa leader Mmusi Maimane rejected the proposed VAT increase, urging the government to focus on a comprehensive economic growth plan instead.
“We are obviously clear about the fact that today there was no prioritisation of cutting expenditure so that you can fund growth. Funding growth is about increasing the infrastructure making sure it is efficient,” said Maimane.
Source:
mg.co.za
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