COSATU calls for the scrapping of VAT and PIT hikes in the new Budget

Zingiswa Losi

Now that Parliament has adopted the Budget, it must honour its promise to scrap the value-added tax (VAT) and personal income tax (PIT) hikes. Whilst none will doubt the Budget’s passing was less than elegant, we should not miss the important gains painstakingly won by Cosatu and other progressive voices, including inside the ANC-led government and Parliament.

Government has heeded opposition from the Federation and others that the proposed 2% VAT hike presented a burden that millions of working and middle-class families could not afford when they are already battling to cope with the rising costs of living.

Whilst Cosatu has opposed any VAT hike or not adjusting PIT brackets for inflation given workers’ already meagre wages, we are pleased Treasury has shifted from its historical default of blue-ticking criticism of its budgetary proposals to now engaging on alternatives.

Cosatu has submitted to government and Parliament a variety of revenue and expenditure options that can generate the same, if not more revenue to rebuild public services and stimulate economic growth, without inflicting pain upon the working class.

We are pleased government has embraced our call to provide SARS an additional R4 billion to tackle R800bn in outstanding taxes. This we hope will improve tax collection by 1% to 2%, generating an additional R20 to R40bn annually.

In the midst of the parliamentary theatrics, a key progressive call has been lost sight of. The Minister for Finance has asked for support for government to exit the austerity budget cuts that have crippled public services that working-class communities and the economy depend upon.

This is a fundamental shift that needs to be supported if we are to rebuild frontline services and stimulate the growth required to create jobs, whilst providing relief for the poor and unemployed. This is a call Cosatu and the left have made for years.

Whilst we are under no illusion that the Budget provides an end to neo-liberalism or a magic wand to undo years of devastating budget cuts to public services; we must defend the gains we have secured under very trying circumstances.

Significant additional allocations have been made to frontline services, e.g. R29bn each for education and health as well as smaller amounts for the SANDF, SAPS, and Correctional Services. These will enable the hiring of 1 800 doctors, 4 000 police officers, halt the retrenchment of contract teachers, as well as hiring other critical frontline staff such as nurses and ECD teachers.

For years Cosatu has campaigned for relief for the poor to be expanded to include exempting key meat, vegetable, and dairy products from VAT. This has been won.

Social grants are due to be increased by double inflation. After several years of inexplicable cuts to the Presidential Employment Programs to just over R3.5bn, it will now be ramped up to R30bn, not enough to overcome unemployment, but a progressive shift in the right direction.

For years much of the budgetary debate has been premised upon the false and neo-liberal belief that we have an expenditure crisis, and if we simply slash allocations, miracles will occur and the economy will take off.

In the midst of the focus on the R14.5bn that the VAT hike would generate, commentators missed the R46bn boost to investments in critical economic infrastructure taking it to over R1 trillion over the next three years.

Key allocations include roads (R402bn), water (R156bn), Metrorail (R19bn), and similar investments in electricity, freight rail, ports, four new hospitals, and13 000 university beds. The revival of Eskom provides 1% to economic growth. Transnet’s stabilisation and recovery along with the reopening of Metro Rail lines and the stimulus impact of the infrastructure program should push growth over 2%.

Further investments in public services, e.g. capacitating Home Affairs, rebuilding municipal services amongst others will open space to take growth to the 3% needed to see unemployment fall from its dangerously high level of 41.6%.

What needs to happen over the course of the next fourteen days, not thirty as that will be too late to stop VAT hike and PIT non-adjustments, is for Parliament to amend and pass the Taxation Laws Amendment Bill. This commitment must be honoured.

It would be an unprecedented breach of trust for this not to happen. This is something we cannot afford after a decade of state capture and corruption. Replacing the VAT hike of R14.5bn and PIT adjustments of R18.5bn, or R33bn in a budget of R2.4 trillion can and must be done.There are several simple and sober ways to do this.

First is through giving SARS the space to ramp up tax compliance. They have already improved revenue collection by an additional R9bn this past week. They should be tasked to further improve revenue collection by 1% or R20bn by November and another 1% or a combined R40bn by February.

This includes tackling revenue lost to illicit tobacco and alcohol trade as well as online gambling.

Second SARB must be engaged to increase its contribution from its reserve currency account by R10bn.

Third, the Development Bank, Industrial and Public Investment Corporations should be engaged to take over R25bn worth of economic infrastructure projects where they can earn a return on investments from the state, e.g. the 13000 university beds and investments in roads, rail, water and electricity.

Fourth these DFIs, the SETAs and the National Skills Fund should be tasked to take over or contribute to the costs of some of the public employment programs, e.g. R25bn. Lastly reducing some of the tax loopholes that wealthy individuals and corporations exploit should be pursued as part of ensuring the poor pay the least and the wealthiest pay their fair share.

These can more than cover the funding that would have been generated through the VAT and PIT hikes.Now is the time for government and Parliament to be decisive and ensure a final Budget that will help turn the tide.

Zingiswa Losi is the president of Cosatu.

** The views expressed do not necessarily reflect the views of IOL or Independent Media.

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