Budget Speech standoff: DA demands zero VAT increase from Godongwana

THE Democratic Alliance (DA) has put its foot down saying it does not want to hear anything about value added tax (VAT) when Finance Minister Enoch Godongwana delivers the Budget Speech, which had been rescheduled for Wednesday. 

The  speech to enable the government to function and deliver services, was cancelled on February 19 after the DA refused to sign it in protest against the 2% VAT increase, which Godongwana was going to announce. 

The political parties represented in the Government of National Unity (GNU) had to go back to the table to debate the increase, which was going to hit hard on consumers. 

The increase was criticised by most political parties and labour unions. 

DA spokesperson Charity McCord said late that the parties were still debating the matter and “there is no progress”. 

“As the DA we don’t stand for any increase, we stand by zero percent,” she said. 

McCord described the debate as constructive. 

“There is no agreement yet, but we are working towards a resolution by 12 March. 

“The postponement of the speech is a victory for the people of South Africa, as it prevents the implementation of a 2% VAT increase that would have broken the back of our economy,” she said. 

Brett Herron, secretary-general of the GOOD Party, whose leader Patricia de Lille is a Minister of Tourism in the GNU, said the Cabinet has met twice to discuss the Budget proposal.

He said the party had not seen the amended Budget proposal. 

“However, in principle we are opposed to a VAT increase since it is a regressive tax and disproportionately affects middle to lower income households and of course most disproportionately the poorest people,” he said.

GOOD Party proposed an alternative way of funding the Budget, such as adjusting the tax credits on retirement fund contributions. 

“The 2021 Tax Statistics for 2020 showed R240 billion in deductions from Personal Income Tax of which R154 billion benefited taxpayers with taxable income of R500k or more.

“It is estimated that in 2022/23, tax credits for retirement contributions for those earning in excess of R750k per annum cost the fiscus R83 billion.”

The party also called for the introduction of wealth tax or “a special tax on super wealth”.

“This can raise between R70 billion and R160 billion annually. 

“This may be more easily implemented from the 2026/27 tax year since it requires a lot more planning than adjusting tax credits.

“⁠Capacitate SARS to enforce tax compliance and collect tax revenue. 

“Although the R800 billion mentioned by the SARS commissioner includes modelled amounts, approximately half of that amount is not modelling but actual uncollected tax revenues,” said Herron.

Freedom Front Plus leader Dr Pieter Mulder only said “discussions are continuing. Cabinet will meet on Wednesday morning to finalise.”

IFP spokesperson Mkhuleko Hlengwa said he could not divulge Cabinet discussions to the media. 

He said the party wished that Godongwana would stick to the programme that was adopted last year of development for the country by the GNU. 

“It follows the reduction of the cost of living that was followed by the medium term. 

“We have made submissions to the minister of finance to present a solid budget which is in favour of the people,” said Hlengwa. 

The ANC has not responded to the request for comment.  

bongani.hans@inl.co.za