The DA and the ANC's alliance partner labour federation Cosatu have called on parliament to use its powers to kill finance minister Enoch Godongwana’s proposal to raise value-added tax.
Cosatu called on government to amend Godongwana’s budget proposal to hikeVAT and to introduce taxes on the wealthy and corporations.
Parliament’s two finance committees on Tuesday held public hearings on the fiscal framework and revenue proposals contained in Godongwana’s budget speech tabled earlier this month.
After a two-percentage point VAT hike proposal in February faced resistance at cabinet level and forced a postponement, the March budget proposed raising VAT by a percentage point over the next two years.
Cosatu parliamentary liaison officer Matthew Parks told the hearing that while there were many progressive provisions in the budget, the labour federation was “deeply dismayed” by the VAT hike and the failure to adjust income tax brackets that will inflict unnecessary pain on working class families and the economy.
“The failure to show any relief for the eight-million SRD grant recipients is beyond shameful. We are equally disappointed that government continues to shy away from putting sufficient resources to support SMMEs, industrialisation and export sectors.”
Parks welcomed the budget’s allocation of 61% for social wage expenditure, but said the budget’s own projections did not expect GDP growth to go beyond 2% in the medium term, which augurs ill for South Africa’s unemployment rate.
“Cosatu is calling on parliament … to amend the 2025/26 budget to scrap the VAT hike and the failure to adjust tax brackets for lower-and middle-income workers, to replace them with some budget reprioritisation and higher taxes upon the wealthy and large corporations, as well as to adjust the SRD grant for CPI, to increase funding for public employment programmes and industrial and export financing.”
About 25 organisations made submissions during the more than five-hour sitting.
DA MP Mathew Cuthbert said the party still strongly opposed a VAT increase as it would “disproportionately burden low- and middle-income South Africans” in a cost-of-living crisis.
“Raising VAT would further erode household purchasing power, slow economic growth and exacerbate poverty. Instead of resorting to tax hikes, the focus should be on reducing wasteful and unnecessary government expenditure.”
Cuthbert proposed changes including a 0% increase to VAT, expenditure reprioritisation in government departments to free up billions of rand, amending expenditure on non-essential programmes and cutting waste.
“The DA further proposes … increasing revenue without raising taxes, conducting comprehensive spending reviews to identify wasteful and failing programmes within government departments, facilitating pro-market measures for economic growth and job creation, and providing and securing property rights to the domestic and international community.”
[The budget] needs the support of other political parties to get things done and if that support is not there, it becomes difficult. This is the new normal. We must internalise it and accept it.
Programme organiser for health lobby group the Healthy Living Alliance Eunice Motha told the hearing that the group was disappointed in the budget’s failure to introduce an inflationary hike on the healthy promotion levy (HPL), better known as the sugar tax.
“The HPL is a cost-effective and lifesaving public health policy measure and not increasing it to the recommended rate of 20% is a loss for public health. In 2022, National Treasury announced an inflationary increase of the HPL from 1.21% to 2.31%.
“However, due to industry influence, they later announced that this increase would only be implemented in April of 2023. Then in 2023, they announced a two-year moratorium on increasing the HPL, which was supposed to take effect on April 1 2025. However, yet again, to our disappointment, the Treasury cancelled this increase indefinitely to give the sugar industry more time to restructure.”
After the tabling of the budget earlier this month, chair of parliament's standing committee on public accounts and Rise Mzansi leader Songezo Zibi said contentious budgets that warrant postponements and more rigorous parliamentary engagement are the "new normal".
"[The budget] needs the support of other political parties to get things done and if that support is not there, it becomes difficult. This is the new normal. We must internalise it and accept it. If we don't, we are deluding ourselves. This is going to be the case for the budget and it may be the case with various pieces of legislation in the future."
Standing committee on finance chair Joe Maswanganyi told TimesLIVE Premium that the next step after the briefing by the minister was a briefing from the parliamentary budget office and the Financial and Fiscal Commission.
“These are organs of state that advise parliament on issues of finance. Then from there, we are going to call on the public to make submissions orally and in writing on the budget. From there, we compile a report, and the report will be taken to parliament.”
While he said he could not pre-empt the level of input that would be made on the budget and its proposals, he said the committee expected the processing of the budget to be done in the next three to four weeks after the tabling of the budget.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.