STRONG doubts about proposed tax rises have been voiced by the SA Revenue Service (SARS) commissioner Edward Kieswetter, who contends they might not be able to adequately handle budgetary problems facing South Africa.
Rather, he calls for more SARS funding to boost tax collecting and retrieve around R800 billion in uncollected taxes. Kieswetter’s comments are especially relevant now that the nation struggles with low economic growth, high unemployment, and ongoing income deficits.
Kieswetter cited the 2018 VAT hike as proof that increasing taxes does not ensure a notable income rise. Although the increase suggests different approaches are required since predicted financial gains were not completely fulfilled.
Modernising SARS will, he underlined, help to improve compliance, widen the tax base, and increase tax collection. A good amount of uncollected taxes—R450bn from theoretical modelling and over R300bn from exceptional returns—showcases the possibility for income increase through more effective management.
As the National Treasury lowers its tax collection projections, reflecting ongoing difficulties including poor economic growth, rising unemployment, and extensive tax fraud, the demand for modernisation arises as these problems have severely taxed public resources; hence, it is essential to investigate environmentally friendly alternatives free of further load on already underprivileged households.
Reflecting Kieswetter’s concerns, the Budget Justice Coalition (BJC) has demanded revenue policies giving social justice and equality top priority. The BJC said this week that it considered a planned 2% VAT increase to be regressive and unfair.
The coalition stressed that this moment calls for progressive budgetary measures safeguarding the rights and lives of the most vulnerable. Based on data from the 2018 VAT rise, the BJC’s position is based on evidence showing that such policies disproportionately burden low-income households while failing to generate the expected income benefits.
While pointing out shortcomings in the budget process, the delay of the 2025 budget tabling presents a chance to investigate different revenue-generating strategies. “The delay creates room for conversations on more fair and efficient methods,” the BJC said.
The coalition said that for far too long, technocrats have dominated the budget process, therefore excluding popular involvement. “This delay is an opportunity to democratise the process and guarantee that common South Africans have their voices heard,” they said.
The BJC noted the 2018 VAT hike as proof that such policies exacerbate inequality and disproportionately affect low-income groups. The coalition said: “A VAT increase forces the poor to contribute a larger share of their limited income; wealthier individuals and companies remain under-taxed.”
Expanding zero-rated items and raising social grants were judged inadequate mitigating strategies. “Zero-rating is a blunt instrument, with higher-income households benefiting more due of greater spending,” the group said.
Moreover, there is no proof that the 2018 VAT rise was successful. “National Treasury missed its revenue targets by R22bn after projecting a R22.9bn increase from the 1% VAT hike,” the BJC said. This failure emphasises the need to use many methods to create income.
The BJC attacked the National Treasury for discounting options like corporate or personal income tax hikes, contending these could be feasible given the right implementation. Emphasising the necessity to tackle tax evasion and base erosion, the coalition said: “We have proposed alternatives to VAT hikes since 2018. Tax evasion and profit shifting to low-tax jurisdictions greatly reduce revenue for public services,” they said.
SARS projects R800bn still uncollected—which emphasises the necessity of better tax management. “Closing gaps and strengthening enforcement could increase income collection without burdening the underprivileged,” the BJC said. The coalition suggested luxury VAT, changes in excise taxes, and a progressive wealth tax among other policies meant to generate around R200bn. “Some ideas are immediately doable; others call for medium-term planning,” they said.
The BJC also approved funding social objectives from the Gold and Foreign Exchange Contingency Reserve Account (GFECRA), which boasts more than R500bn. Just R150bn has been spent, entirely for debt reduction. The coalition advised Treasury to take GFECRA under consideration in order to properly handle the budget shortfall.
To further relieve financial pressure, the BJC also advised renegotiating terms on public debt owing to companies such as the Government Employees Pension Fund (GEPF), which has R80bn of debt. “Instituting more favourable repayment terms can reduce some of the pressure on the fiscus,” the coalition said.
The BJC underlined that “expenditure wins must be supported by progressive revenue proposals”, even while praising above-inflation contributions to sectors including education and health in the postponed 2025 budget.
Referring to its 2020 Imali Yesizwe report, which presented a human-rights-centred budget framework, the coalition demanded strong public and expert participation in budgetary policymaking. “Fiscal policy must target unemployment and poverty while advancing long-term socio-economic development,” the BJC said.
Should the suggested VAT increase be rescinded without a backup plan, the BJC cautioned against cutting social expenditure. The alliance declared, encouraging the government to investigate pro-poor income sources: “We reject VAT increases but equally oppose cuts that threaten service delivery and increase long-term social debt.”
The delay of the 2025 budget, the BJC said, presents a chance to reconsider the financial direction of South Africa. “Advancement of human rights depends critically on the budgetary process. Right now, the coalition said, we need a people’s budget. Such a budget would give the most vulnerable top priority, therefore guaranteeing that income-generating policies are fair and do not widen inequality.”
The BJC called on the National Treasury to:
- Table a pro-poor, developmental budget with above-inflation allocations to socio-economic priorities;
- Strengthen tax collection to restore the tax base and curb illicit financial flows;
- Adopt progressive tax and debt models to mobilise resources from wealthy individuals and corporations; and
- Promote transparent, inclusive budgeting by reintroducing pre-budget public hearings.
Both SARS Commissioner Kieswetter and the BJC share the sentiment that, without aggravating inequality or burdening the vulnerable, investing in tax administration and implementing progressive fiscal policies provide a more durable route to fiscal stability.
Recovering uncollected taxes, increasing compliance, and making sure wealthier people and businesses pay their fair amount will help South Africa to achieve more economic stability and hence advance social fairness.