Cosatu hopes Godongwana 'avoids temptation to inflict pain on poor through VAT' increase

As finance minister Enoch Godongwana gears up for his second attempt to deliver his 2025 budget speech, the ANC’s alliance partner Cosatu has added to his headache, warning against any VAT increase.

Godongwana and the National Treasury are rumoured to have revised the initial two percentage point VAT increase proposal to 0.5% after it was flatly rejected by cabinet last month.

But trade union federation Cosatu believes the minister should look elsewhere, including capacitating the revenue collector Sars, instead of increasing VAT.

Cosatu spokesperson Matthews Parks and president Zingiswa Losi said on Wednesday Godongwana and the Treasury should not punish the poor.

“We hope the government doesn’t revert to extremes, it doesn’t revert to austerity budget cuts which have really weakened public services that society and the working class depend upon,” said Parks. 

“We hope they avoid the temptation to inflict the pain upon the poor through VAT or personal income tax which really hurt working class families especially hard.”

Losi said she was hopeful Godongwana would listen and not “shove the VAT increase down poor people's throats”.

“We are hopeful that minister Godongwana would have listened. We don’t want a Kenya situation in South Africa. We hope leaders are able to draw lessons from other countries and understand the poor when they say we cannot stomach it anymore,” said Losi.

“We are waiting and hopeful that what he will not do is increase personal income tax and VAT and also we are hopeful he’s not going to go for austerity.”

Parks told the SABC parliament still has time to pass the budget after it is delivered.

“They are going to have to find each other because parliament needs to pass the budget for the government to run,” he said.

“There is still time, the budget will be tabled today [Wednesday] but parliament will only vote on it in two weeks' time. There is space within the law for even three months, but we'd like them to be more elegant than that, we don’t need to have these teething pains.”

Cosatu believes the VAT increase debate, which will only add less than R30bn to the fiscus, should not hold at ransom a R2-trillion budget.

Parks said this was not “such a big crisis” for Cosatu as there were ways of resolving this impasse. “You are talking about R24bn out of a R2-trillion budget. Surely one can find the money,” he said.

The government had to not only finalise the budget but also get it right.

“It needs to rebuild the state because society, workers, businesses depend upon a capacitated state. We need to inject stimulus into the economy to get us from the 1% economic growth rate to the 2% or 3% which really is going to turn things around,” he said.

“We need to provide a pathway to employment for the 12-million unemployed South Africans, especially young people, because you can’t sustain a country with 41% of young people unemployed.”

Cosatu has proposed that Godongwana should allocate more money to Sars which has indicated it needs about R2bn extra to be able to collect more revenue.

“Treasury will always ask, correctly, where [do] we get the money? We think simply give Sars the resources it needs to improve tax compliance. Give them an extra R2bn a year to improve tax compliance by at least 2% a year,” said Parks.

“That’s the R40bn we need to find. We don’t need to go for new taxes which hurt the poor. Yes, we can increase the tax upon the wealthy and large corporations for sure, but we really need to improve our tax compliance because ultimately that’s what’s going to resolve issues and to do things the smart way. We don’t need to go to the extremes.”

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