Parliament’s standing committee on finance has adopted a report on the budget that could put paid to finance minister Enoch Godongwana’s plan to hike VAT this year and next.
The finance committee’s report on the fiscal framework and tax proposal will now be tabled in a crucial sitting of the National Assembly this afternoon for its consideration and vote.
The report was adopted in a committee meeting that kicked off at 10am on Tuesday morning and ended at 6pm.
Parties debated amendments that each wanted to introduce to the report on Godongwana’s March budget speech, which proposed a 0.5 percentage point VAT hike for each of the next two years.
Six MPs from ActionSA, the ANC and the IFP voted in favour of the report with amendments when finance committee chair Joe Maswanganyi put it to a vote late on Thursday.
This was after ActionSA tabled a motion to accept the report, with a proposal that the VAT hikes be rejected and Godongwana given 30 days to offer revenue alternatives.
This was part of a behind-the-scenes deal struck by the three parties to get the budget approved by the full sitting of parliament on Wednesday.
The DA, MK Party and the EFF rejected the report. But now with the support of ActionSA, IFP, FF Plus, the Patriotic Alliance other parties in the bag, the ANC is likely to succeed in getting the budget, which requires 50 plus one support, over the line albeit by a whisker.
By late on Tuesday, there were still last-minute behind the scenes discussions in a last-ditch effort by the ANC to gain more support for the budget.
President Cyril Ramaphosa and DA leader John Steenhuisen met on Tuesday, but no deal came out of that bilateral meeting.
Maswanganyi told reporters after the meeting that Wednesday afternoon's National Assembly sitting remained on track and Godongwana was expected to be part of the debate.
“The report has been officially adopted ... The process does not end today. We still have to consider the tax administration laws that deal with issues of taxation. And parliament still has to go through this report, adopt or reject the report,” he said.
While it rejected the VAT hike proposal, ActionSA proposed the committee should accept the report on the condition that the finance minister present alternatives for reduced spending and revenue generation. The DA proposed a consolidated spending review.
ActionSA’s Alan Beesley stressed that his proposal was premised on the fact that the party rejected the VAT and all tax increases. But the DA’s Mark Burke rejected it saying it flew in the face of basic fiscal fundamentals.
“If someone gives you financial statements where the books don’t balance, those financial statements don’t balance and make no sense. It is not a valid proposal. If we go down the route of considering this, we are going down a road where the credibility of this committee is questioned not just by the public but by the courts.”
EFF MP Omphile Maotwe said her party could not support a VAT hike. Instead, she proposed a wealth tax on underutilised land and luxury holdings such as game reserves as well as a one-off wealth tax on all trusts established before 1994.
“We amend the fiscal framework and revenue proposals. We reject the proposed VAT increase. It must remain the same to protect the poor and working class from higher taxation. Adjust PIT with inflation. We propose a 1.5 percentage point increase to corporate income tax and two percentage points in the following year.”
MK Party MP Des van Rooyen said failing to adjust tax brackets would put household incomes at risk. He called for a progressive wealth tax that ensured the ultra-wealthy contributed to South Africa as well as an increase to corporate income tax by 1% to generate billions of rand in additional revenue without stifling investment.
“We are not in support of a VAT increase because of its adverse impact on the majority of our people, mainly the poorest of the poor. We don’t support this VAT increase for this financial year and the other financial year. We also call for an adjustment to the tax brackets as it can accommodate inflation.”
EFF MP Sinawo Thambo said because of the unpopular VAT hike proposal, the committee needed to “come to a consensus” that it was going to amend this report.
“I worry that there is an assumption that we are just going to accept this. We must state in the report that we are amending the fiscal framework and revenue proposals. If not, we are performing a remedial activity.”
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