VAT rise nightmare far from over

Finance Minister Enoch Godongwana's VAT increase headache appears to be far from over with only days to go before he is expected to table his rescheduled Budget Speech in the National Assembly on 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. 

However, his partners in the Government of National Unity (GNU) and Cosatu are digging in their heels about a VAT increase.  

Some GNU members see a VAT increase as a "lazy and irresponsible way to increase revenue" and if Gododongwana forges ahead with his planned increase, it could be the straw that could break the coalition government’s back.

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 the tradition of consulting on the budget is not limited to the ANC's top leadership.

DA leader John Steenhuisen and the party's clearing house representative, Helen Zille, have both expressed reservations about the VAT hike, saying that they were not consulted enough on the proposal.

DA Spokesperson on Finance Mark Burke said the ANC was willing to risk South Africa’s economic stability in a desperate attempt to force a VAT increase down the throats of South Africans.

"The DA continues to advocate for credible pro-growth, pro-jobs and actual alternatives that focus on efficiency. We can do this by spending smarter and capacitating SARS, rather than raising taxes on a struggling economy."

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

“We hope that further engagements will take place, including after the budget has been tabled at Parliament to ensure that we review the totality of government expenditure and revenue options,” Parks said.

Cosatu had suggested that Treasury start discussions with the Government Employees Pension Fund (GEPF) over a pension contribution holiday as the government scrambles to find a solution to the R60 billion shortfall in the budget.

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

"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,” he said.

Political analyst Ntsikelelo Breakfast said the GNU was on the verge of collapsing because of the VAT issue, among others.

“It will be interesting how things are going to play themselves out because some of the ANC politicians feel undermined. It is not only the withdrawal of the DA in their support of the budget but also the DA having gone to the US after AfriForum had also gone there…because how do you go to another country and bad mouth a government that you are a part of…so to me that was the straw that broke the camel’s back."

Cape Times