FINANCE Minister Enoch Godongwana is under fire from his coalition partners within the Government of National Unity (GNU) as well as allies in the ANC Alliance, particularly the Congress of South African Trade Unions (Cosatu), for his proposed plan to increase Value-Added Tax (VAT). Criticism has intensified over what many view as insufficient consultation on his approach, particularly in light of the impact such an increase could have on low-income South Africans.
Godongwana is set to present his budget on Wednesday, where he is expected to suggest a gradual VAT increase over the next two years, commencing with a modest 0.5% hike this year. This proposal follows the postponed budget speech due to opposition from the Democratic Alliance (DA) and other coalition members, who expressed strong reservations against a steeper 2% increase. Detractors argue that such hikes disproportionately affect those in poverty and fail to consider viable alternatives for funding the budget.
Those opposed to a VAT hike, even an incremental increase, continue to argue that Godongwana should have consulted more widely and considered alternative proposals for funding the budget.
Godongwana has reportedly defended his proposal, saying that he only needed to consult with President Cyril Ramaphosa and the ANC's top seven officials, who had given him the green light.
However, his coalition partners were disputing this, saying the tradition of consulting on the budget was not limited to the ANC's top leadership.
DA's leader John Steenhuisen and the party's clearing house representative, Helen Zille, have both expressed reservations about the VAT hike, saying that they were not consulted enough on the proposal.
DA Spokesperson on Finance Mark Burke said the ANC is willing to risk South Africa’s economic stability in a desperate attempt to force a VAT increase down the throats of South Africans.
"The DA continues to advocate for credible pro-growth, pro-jobs and actual alternatives that focus on efficiency. We can do this by spending smarter and capacitating SARS, rather than raising taxes on a struggling economy."
Cosatu spokesperson Matthew Parks has also criticised Godongwana for not engaging sufficiently with stakeholders on alternatives to the VAT hike.
“We hope that further engagements will take place, including after the budget has been tabled at Parliament to ensure that we review the totality of government expenditure and revenue options,” Parks said.
The Good party's secretary general Brett Herron has warned that if Godongwana persists with the VAT increase, it could spell disaster for the coalition.
"If the Minister of Finance is persisting with a VAT increase, then he is not listening to his coalition partners.
"VAT is the wrong way to increase revenue. It is a lazy, crude and irresponsible way to increase revenue. It is a regressive tax that disproportionately affects poor, low-income and middle-income families,” Herron said.
Political analyst Ntsikelelo Breakfast said the GNU was on the verge of collapsing because of the VAT issue, among others.
“The GNU is about to collapse. It will be interesting how things are going to play themselves out because some of the ANC politicians feel undermined.
"It is not only the withdrawal of the DA in their support of the budget but also the DA having gone to the US after AfriForum had also gone there…because how do you go to another country and bad mouth a government that you are a part of…so to me that was the straw that broke the camel’s back."
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