Finance Minister Enoch Godongwana, during his Budget Speech tabled earlier this month, proposed a 0.5% VAT hike for two consecutive 2025/26 and 2026/27 fiscal years in a bid to shore up the R58 billion Budget deficit.
Image: Armand Hough / Independent Newspapers
The Congress of South African Trade Unions (Cosatu) has called on Parliament to exercise its legislative authority and amend the 2025/26 Budget to scrap the value-added tax (VAT) hike.
This comes after Finance Minister Enoch Godongwana, during his Budget Speech tabled earlier this month, proposed a 0.5% VAT hike for two consecutive 2025/26 and 2026/27 fiscal years in a bid to shore up the R58 billion Budget deficit.
However, Godongwana also announced the expansion of basked of VAT zero-rated food itemsto include canned vegetables, dairy liquid blends, and organ meats from sheep, poultry and other animals to protect vulnerable.
Cosatu on Tuesday presented its submission before the Standing Committee on Finance and the Select Committee on Finance, which convened a public hearing with the aim to assess current economic policies and strategise future budgeting frameworks amidst an evolving fiscal landscape.
The trade union federation said the Budget's primary source for funding will be a painful blow to millions of highly indebted working-class families and an already battered economy.
Cosatu's parliamentary coordinator, Matthew Parks, said they were deeply dismayed by the VAT hike and the failure to adjust income tax brackets will inflict unnecessary pain upon working class families and the economy.
"The failure to show any relief for the eight million SRD Grants is beyond shameful. We are equally disappointed that government continues to shy away from putting sufficient resources to support SMMEs, industrialisation and export sectors," Parks said.
"We cannot support tax hikes upon the working class and the poor and thus call upon Parliament to reject these ill-considered bleeding of workers’ already meagre wages and amend the Budget with more progressive revenue options. VAT is regressive and hurts the poor who already cannot afford to buy food, electricity or transport.
Parks also said the Godongwana failed to adjust tax brackets for lower- and middle-income workers to replace them with some budget reprioritisation and higher taxes upon the wealthy and large corporations, as well as to adjust the Social Relief of Distress (SRD) Grant for inflation.
"The decision not to adjust tax brackets for low- and middle-income workers is deeply regrettable when they are already drowning in debt with their overstretched wages not keeping pace with inflation. These tax hikes will now make the lives of millions even more difficult," he said.
"We cannot afford to continue to stumble along a path of business as usual and expect better results. A bold and decisive Marshall Plan is needed if we are to capacitate the State, stimulate growth and slash unemployment. We do not have endless time to make the bold changes our many socio-economic crises demand. Cosatu will be seeking further engagements with government on these burning matters.
As the nation grapples with inflationary pressures and fluctuating global markets, the committees sought to evaluate the impact of existing fiscal measures and explore innovative solutions that could bolster economic resilience.
The session was attended by many captains of industry in South Africa's finance sector, which saw robust exchanges of ideas and insights from committee members, economists, and stakeholders.
During the discussions, members highlighted the necessity of improving financial oversight to ensure that resources were allocated efficiently and transparently.
There was consensus on the need for enhanced accountability mechanisms to guard against mismanagement and to maximise public trust in government expenditures.
The meeting also delved into strategic budget planning for the upcoming financial year, particularly in areas that demand urgent attention, such as education, healthcare, and infrastructure.
Merging fiscal prudence with developmental needs emerged as a primary focus, as committee members debated the merits of recalibrating budget priorities to better serve the populace.
Various topics were discussed with various submissions made to the committee, including excise tax increases, revenue collection, healthcare, medical services and state-owned-enterprises.
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