Parties, trade unions, and lobby groups have voiced strong objections to the proposed VAT increase in the revised 2025/26 Budget, arguing that it will disproportionately impact lower- and middle-income households already grappling with financial difficulties.

The concerns were raised during a joint meeting of the parliamentary finance committees on Tuesday ahead of the adoption of the Budget next week.

Cosatu’s parliamentary counselor, Matthew Parks, said the labour federation was quite happy with allocations made to the South African Revenue Service (SARS) to help tackle tax evasion.

“We are, however, opposed to the VAT hike, and we appreciate it's less than the 2%, but we still feel a VAT hike hits the working class, who are just simply drowning in debt, are struggling to survive, and so forth.

“We are also concerned about not having tax brackets for lower- and middle-income workers, who, again, are struggling to cope with the rising cost of living,” Parks said.

In the Cosatu submission, Parks said there was space on the revenue front to reduce the burden on the fiscal by shifting some of the economic infrastructure projects to the development finance institutions (DFIs) and also engaging the South African Reserve Bank (SARB) about increasing the Gold and Foreign Exchange Contingency Reserve Account allocation this year by R10 billion.

Responding to a question on whether they supported wealth tax, Parks said: “There is more space to look at wealthy individuals and companies.”

DA MP Mat Cuthbert said his party was strongly opposed to any VAT increases.

“We believe that it would disproportionately burden low- and middle-income South Africans, who we believe are already grappling with the cost of living crisis.

“We believe that raising VAT would further erode household purchasing power, slow economic growth, and exacerbate poverty,” said Cuthbert, who indicated they were sharing their constructive alternatives while negotiations within the Government of National Unity (GNU) were under way.

He said instead of resorting to tax hikes, the focus should be on reducing wasteful and unnecessary government expenditure and shifting towards implementing pro-growth economic policies that will drive investment and job creation.

Cuthbert proposed in the DA submission several measures, which included their continuation of a zero VAT increase, implementing expenditure reprioritisation measures across departments, and reprioritising expenditure on non-essential government programmes or goods and services within departments

Responding to questions, Cuthbert said studies have shown that the introduction of a wealth tax will not be effective in generating the kind of revenue to sustain the fiscus.

He took a swipe at the EFF for suggesting it was pushing liberal reforms and that the DA was anti-poor when the members of the Red Berets raided the VBS Mutual Bank.

EFF MP Omphile Maotwe earlier said the DA was wasting their time with its submission, which was not pro-poor but messaging that talked about privatisation.

“You need to catch a wake-up call and don’t come here and think you are a bigger brother in GNU,” she said.

Amandla Mobi’s Tlou Seopa said the attempts to improve funding health, education, and social grants risked the effectiveness of the Budget by increasing VAT.

“The minister had a chance to consider other tax options experts showed were feasible enough to raise revenue,” Seopa said.

She accused Finance Minister Enoch Godongwana of protecting big business and the super-rich by refusing to increase corporate income tax and implement a wealth tax.

“Researchers and experts have shown that taxing the wealthy more would help raise the revenue needed to fund public services and help close the inequality gap,” she said.

Seopa added that Godongwana and the National Treasury should eliminate obstacles to extending the social relief of distress grant and increase the grant.

“We continue to demand National Treasury start making decisive plans to increase and expand the grant into Basic Income Grant.”

Lisa Higginson of Budget Justice Coalition said they were encouraged to see a shift away from harmful spending cuts.

“But we are concerned about regressive VAT increase and failure to engage with alternatives put forward,” Higginson said.

She said the proposed VAT increase was likely to increase social and economic hardships and was unlikely to generate revenue.

“We recommend that the VAT increase is halted until the National Treasury demonstrates that alternatives have been assessed. We would like every single alternative looked at before something that has a negative impact on the country is implemented,” Higginson added.

She also recommended that the freeze on the government’s contribution to the Government Employee Pension Fund be seriously considered as a stop-gap measure until something else was implemented.

mayibongwe.maqhina@inl.co.za

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