Godongwana and DA still bickering over VAT hike

Finance Minister Enoch Godongwana on Friday again accused the DA of agreeing to a value-added tax (VAT) increase in exchange for the contentious Expropriation Act.

Godongwana, along with officials from the National Treasury, briefed Parliament’s standing committee on finance and select committee on finance at a joint meeting on Friday.

The meeting discussed the fiscal framework and revenue proposals.

VAT increase debate

During the session, Treasury director-general Duncan Pieterse addressed concerns whether raising the VAT rate would generate significant revenue.

Pieterse said that the previous VAT hike from 14% to 15% in 2018 did generate additional revenue but noted that VAT refund payments from the South African Revenue Service (Sars) reduced the net figure.

“If you look at the overall net VAT figure, which includes the domestic VAT, import VAT as well as VAT refunds paid by Sars, it looks as if the VAT only increased by R7 billion even though we were supposed to raise about R22.9 billion.

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“So at face value, one would say it didn’t raise the money, but if you break it down according to the different constituents, it did raise money,” he said.

He also said that direct taxes, such as personal income tax and corporate tax, were already high, which is why the Treasury opted not to increase them.

“Although the actual payment of corporate income tax is made by the corporate, there will be follow-up impacts on employment and prices, so we did not think that was a good way to go,” Pieterse said.

Godongwana claims DA supports VAT hike

Godongwana addressed the DA’s criticisms of the budget, following its postponement on 19 February.

“The DA made an unusual step and came here and made a lot of accusations,” he said.

Following the postponement, a team appointed by President Cyril Ramaphosa explored five budget options, according to Godongwana.

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The minister said the DA’s proposed option included no inflationary adjustment to personal income tax brackets and an increase in the fuel levy.

“To suggest, as they do, that they do not want any other increases is inaccurate,” he stated.

After reviewing the options, the Treasury considered a combination of the DA’s proposal and another option, which included a 1% VAT increase to 16% spread over two financial years.

Godongwana asserted that in a letter to Ramaphosa the DA accepted a 0.5% VAT hike.

“The DA has sent a letter to the president accepting the 0.5% in exchange for things which are outside the budget, like the Expropriation Act,” he claimed.

Watch the meeting below:

The minister emphasised that the Treasury remained open to discussions with Parliament on budget amendments.

“We accept that Parliament has got authority to amend the budget, but we would plead that matters be focused on how to make this budget efficient.

“In this regard, we are approaching this with an open mind, and we will accept your guidance.”

DA clarifies minister’s comments

DA national spokesperson Willie Aucamp denied Godongwana’s claims. “No, that’s not the total truth,” he told The Citizen on Friday.

Aucamp said that the DA had only considered a 0.5% VAT increase on the condition that it was temporary and accompanied by substantial tax cuts the following year.

“Thereafter, there must be substantial tax decreases across the board,” he said.

The DA also proposed cost-cutting measures to ensure government spending is focused on economic growth.

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“Across the board, in all departments, we must make sure that we spend money on items that really contribute to the growth of the country; we need to do cost-cutting,” Aucamp added.

He said the DA believed the Expropriation Act hinders economic growth and had “a direct impact on the budget itself”.

“We need to have economic growth in this country and, therefore, we need to change or make alterations to the Expropriation Act in such a way that at all times a court must have the final say in the value of a property. That will ensure we can attract investors again.”

Aucamp insisted that the DA did not simply accept the VAT hike.

DA’s position on the Budget

Additionally, Aucamp said discussions on the budget were ongoing within the Cabinet.

“Those meetings are confidential; it’s obviously market-sensitive, so I do not have that information.

“The ANC knows exactly what we’ve put on the table. They know exactly what our conditions and proposals are.”

With the fiscal framework and revenue proposals set for debate and a parliamentary vote on 2 April, Aucamp said the DA would finalise its position on 31 March.

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