Cape Town - Opposition political parties have strongly criticised National Treasury’s decision to increase the Value Added Tax (VAT) saying the poor will suffer the most.
Finance Minister Malusi Gigaba announced the 2018 budget on Wednesday in the midst of a stagnant economy and pressure to deal with government’s growing debt levels.
Gigaba announced a number of tax adjustment measures to increase tax revenue by at least R36 billion.
The adjustment of VAT from 14% to 15% (1%) has caused concern amongst opposition parties with some saying it was unnecessary as the poor would feel it the most.
DA leader Mmusi Maimane said the government could have been able to generate addition revenue by selling off some of the State-Owned Enterprises (SOEs) and cutting down cabinet.
“Poor people are going to pay for this through VAT and Fuel levy increase. They should sell off some of the SOEs like South African Airways, we do not need SAA. We should cut down cabinet to 15 and that could save billions. We missed the opportunity today to set out a plan. It is going to be hard for poor people. We should be using tax to boost manufacturing,” said Maimane.
Cope leader Mosiuoa Lekota shared similar sentiments and said he was highly disappointed that the burden placed on the poor would increase.
“This is not giving us hope of how we going to come out of the debt trap that we are in today. The interest of the debt is not being dealt with. We should be cutting out bureaucracy
The VAT, the burden is being put on the tax payer and the poor people are going to suffer,” said Lekota.
ANC Chairperson Gwede Mantashe said he was pleased with the budget and said that it was a tight budget that Gigaba was able to tackle.
“Quite a tight and difficult budget that he had to deal with. But he made good allocations on health and education. He compensated for the increase in VAT. He has done what is right in the circumstances. The fact that VAT has not been revived after a long time means SA government has been resilient,” said Mantashe.
The ACDP’s Steve Scott said Gigaba lost out on an opportunity to spend money on the right departments to deal with issues that affect government spending such as corruption.
“We believe state expenditure can be reduced by dealing with corruption. If we spend on things that we should be spending on, there would be no need to increase VAT,” said Scott.
The UDM said the ANC had spent far too much time not dealing decisively with corruption, and have now cornered the poor to pay more VAT to increase government expenditure.
Gigaba explained that the VAT increase was necessary, but that the increase in old age and social grants would be able to cushion the blow on the poor
Social grants will increase to R400 from April 1 and old age to R1690.