Jy VAT 'n kans

FINANCE Minister Enoch Godongwana is facing criticism from his coalition partners for his plan to raise VAT in his budget speech this Wednesday.

Godongwana is expected to propose a gradual increase in VAT over the next two years, starting with a smaller hike of 0.5% this year, when he presents his budget to the National Assembly. 

The finance minister's budget speech was postponed last month after GNU partners refused to allow for a 2% increase in VAT, saying this hike would have disproportionately affected poor and low-income families. 

Those opposed to a VAT hike, even an incremental increase, continue to argue that Godongwana should have consulted more widely and considered alternative proposals for funding the budget.

Godongwana has reportedly defended his proposal, saying that he only needed to consult with President Cyril Ramaphosa and the ANC's top seven officials, who had given him the green light. 

However, his coalition partners are disputing this, saying that the tradition of consulting on the budget is not limited to the ANC's top leadership.

GOOD secretary general Brett Herron has warned that if Godongwana persists with the VAT increase, it could spell disaster for the coalition. 

He says: "If the Minister of Finance is persisting with a VAT increase, then he is not listening to his coalition partners. 

"VAT is the wrong way to increase revenue. It is a lazy, crude and irresponsible way to increase revenue. It is a regressive tax that disproportionately affects poor, low-income and middle-income families.”

GOOD, like other parties, have made alternative proposals for keeping the spending priorities as proposed in the budget speech that was not delivered, but funding it in other ways including improved tax compliance which would boost SARS revenue by about R400 billion. 

“Improve tax anti-avoidance capacities at SARS. Reducing the tax credits threshold for retirement contributions which at R350,000 per year are too generous and make virtually all retirement contributions tax deductible, and then in the outer budget years implementing a wealth tax,” Herron suggested as alternative solutions to a VAT hike.

Cosatu spokesperson Matthew Parks has also criticised Godongwana for not engaging sufficiently with stakeholders on alternatives to the VAT hike.

He adds: “We can move towards a budget that eases the burden on workers, ensures the wealthy pay their fair share, that capacitates the state to deliver quality public services that working class communities and the economy depend upon, that stimulates badly needed economic growth and slashes unemployment, whilst protecting and providing relief for the poor.”