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Solidarity believes the National Treasury’s proposal to increase Value Added Tax (VAT) with up to two percentage points to supplement government revenue is a crazy idea.  Apparently, this step is being considered to enable the continued payment of the R350 social emergency grant in the midst of a public financial crisis. 

If such a step is decided upon, it wil unnecessarily put already vulnerable households in South Africa under even greater pressure. The outcome of the previous VAT increase in 2018 was that it had produced only about half the Treasury's expected revenue from VAT – a clear indication that South Africans are already being overtaxed.

Any attempts to increase taxes will not have the desired effect, and in such a case the Treasury will in fact be trying to get blood from a stone. This is also clearly stated in a report of the Solidarity Research Institute (SRI). “The solution to the expected budget deficit must be sought on the expenditure side. The state urgently needs to rein in its spending and relinquish more of its tasks to the private sector. The government must realise that it simply has no more money to pursue pipe dreams such as the NHI and all sorts of other nonsensical ideas,” said Theuns du Buisson, economic researcher at the SRI.

The real solution is urgent economic growth. Disposable come is the decisive factor to achieve this, and a tax increase wil put this under even more pressure.  “The government should instead focus on removing obstacles for the private sector and solving the electricity crisis with the help of the private sector. It will cost the state nothing  and dramatically broaden the tax base.”

Solidarity therefore calls on the Treasury to act purposefully against misappropriation of funds. Furthermore, the Treasury also owes an apology to the people of South Africa. “The extent to which they threaten ordinary and hard-working people in the country with higher taxes is a disgrace. In the end, citizens are again paying the price for the government's ineptitude,” Du Buisson said. 

Read Solidarity's full report on planned VAT increases here: https://cms.solidariteit.co.za/wp-content/uploads/2023/09/2023-09-19_BTW-Engels_VERTAAL.pdf

Issued by Solidarity