Possibility of hike in VAT a major concern of opposition parties

The possibility of hike in value added tax has been revealed as a major concern of opposition parties and civil society ahead of Finance Minister Malusi Gigaba’s budget speech on Wednesday.

A revenue shortfall of over R50-billion‚ announced by Gigaba last year‚ has raised fears that the country’s poor may bear the brunt of the South African Revenue Services’ poor tax collection rate.

But political parties have admitted that this year’s budget will be one of the most difficult with the country undergoing a lacklustre economic performance while it needs to fund major projects like the turnaround of state-owned entities and fee-free higher education.

United Democratic Movement leader Bantu Holomisa said there were more demands on the budget than the state coffers could cater for.

“The pressing issues‚ like bailing out SOEs‚ may necessitate an increase in tax‚ even VAT for that matter. That’s the main worry‚ if they increase VAT it’s going to hit everybody [including] the poor. It’s going to hit them‚” said Holomisa.

He said the state still needed to do infrastructure projects like rollout of water and roads.

African People’s Movement leader Themba Godi‚ who also chairs Parliament standing committee on public accounts‚ said the problems faced by Gigaba were well known.

“There is this hugely anticipated [hiking] of tax but I think there might be a closer look at SARS‚” said Godi.

He said he was expecting an investigation to look at whether the state was not leaking money at SARS‚ the country’s main revenue collection arm.

“I am just hoping that the word privatisation does not feature because‚ looking at the desperate situation we are in and the ideological inclination of the powers that be in the ANC‚ one cannot rule out ...an attempt to sell off some assets as an attempt to raise immediate cash‚” he added.

Godi said any tax hike would be negative.

“It is very difficult‚ I don’t envy him. It doesn’t matter whether you had Pravin [Gordhan] or you had Trevor Manuel ...it’s a very tight one‚” added Godi.

The DA’s deputy shadow finance minister‚ Alf Lees‚ said the DA would reject any tax increases by Gigaba.

“Any tax increase tomorrow will be rejected by the DA‚ including the likely removal of zero rating on fuel. We specifically reject any talk of a VAT increase‚ which will hit the poorest hardest‚” said Lees.

Lees said the DA had identified a “six pack” of challenges‚ which must be addressed in Wednesday’s budget.

“These include a broken budget process‚ weak economic growth‚ ballooning national debt‚ dysfunctional institutions‚ zombie state-owned enterprises and long-term fiscal risks.

“We need to cut spending and expenditure in the right areas‚” said Lees.

Lees said cuts ought to focus on superfluous government departments‚ "zombie" SOEs‚ and vanity projects such as the New Development Bank.

“If the budget does this‚ we will support it. However‚ if the budget cuts basic services such as health‚ education‚ social grants and infrastructure that facilities growth‚ we will reject it‚” added Lees.

Wayne Duvenage‚ CEO of Organisation Undoing Tax Abuse‚ said it was unlikely that Gigaba would not announce a tax hike.

“It’s going to be quite a painful tax because there is a lot of damage to be undone by the past seven‚ eight years of poor governance and poor leadership‚” he said.

He said he expected tax hikes to affect middle class and the rich‚ including a petrol levy hike.

Corruption Watch executive director‚ David Lewis‚ said this year’s budget will be tightly drawn because of the state of the economy and the state of SARS.

“[Gigaba must] elaborate and follow through on the president’s plan to clean up SARS. One of the greatest constraints that our budget faces is in the decline of the revenue collection‚” said Lewis.