MPs disagree on VAT increase, question Treasury’s ability to perform ‘miracle’

Members of Parliament (MPs) remain divided on whether to send the budget back to Finance Minister Enoch Godongwana and the National Treasury for the removal of the proposed value-added tax (VAT) hike.

The National Assembly’s Standing Committee on Finance and the NCOP’s Select Committee on Finance held a joint meeting on Tuesday to deliberate on the matter.

The discussions centred on the fiscal framework and revenue proposals, which set out economic policies, revenue projections, and government spending limits.

The meeting took place amid a deadlock between the ANC and the DA over the planned 1% VAT increase to 16%, spread over two financial years.

The first 0.5% hike is scheduled to take effect on 1 May.

VAT increase removal from budget

During the meeting, the MK party’s Brian Molefe labelled the fiscal framework and revenue proposals as “unrealistic”.

Molefe suggested that the committee’s report should accurately reflect the extent of public opposition to the VAT hike.

“If you say 49 out of 51 people rejected it, to use the word ‘most’ is misleading. It’s virtually everybody rejected it except two,” he said.

“If you really want to summarise this correctly and factually, you can say 96% did not approve of the VAT proposal,” the former Eskom CEO continued.

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Under the Money Bills Amendment Procedure and Related Matters Amendment Act, Parliament has the authority to make changes to the budget.

ActionSA MP Alan Beesley proposed an amendment to the fiscal framework and revenue proposals, calling for the removal of both the VAT increase and the introduction of bracket creep in personal income tax. He also suggested that the National Treasury be given 30 days to revise the budget.

ANC MP Seaparo Charles Sekoati supported this proposal, while DA MP Mark Burke put forward an alternative suggestion.

He proposed removing only the VAT increase while cutting consolidated expenditure by R13.5 billion.

“We are not making comments here on where the money should come from or go to; we are simply amending the fiscal framework to take out the VAT increase,” Burke said.

Opposition to VAT increase

MK party MP Des Van Rooyen rejected the VAT increase outright.

“As the MK party, we are very clear. We are not going to support any VAT increase because it’s a regressive move that further burdens our people who are currently unemployed.”

EFF MP Sinawo Thambo also opposed both 0.5% VAT increases planned for the 2025/2026 and 2026/2027 financial years.

“The Money Bills Amendment Procedure and Related Matters Amendment Act says we must state clearly within this report whether we accept or amend the fiscal framework and revenue proposals,” he said.

READ MORE: Budget 2025 VAT exemptions show Treasury’s disconnect with poor people

Thambo argued that Beesley’s proposal was not a true amendment since it included the 30-day condition.

Another EFF MP, Omphile Moatwe, rejected the DA’s proposed spending cuts.

“We don’t agree with the austerity measures that the DA is putting on the table. It has not yielded any results for the past 30 years.”

Fiscal framework to be sent back to Treasury?

IFP MP Nhlanhla Mzungezwa Hadebe supported the idea of sending the budget back to Treasury.

EFF MP Annacleta Siwisa, however, questioned whether Godongwana and Treasury could present a viable alternative within 30 days, given that they had already failed to resolve the VAT issue when the budget speech was postponed in February.

“What miracle are we expecting the minister to come up with in 30 days if they could not come up with a miracle [during] the first time the budget was postponed because there was no agreement and the main reason was the VAT issue and still they did not come with alternative measures,” Siwisa said.

While some argued that Parliament could only accept, amend, or reject the budget, Beesley maintained that his proposal was legally valid.

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“The National Treasury is facilitating the discussions [but] it is ultimately this committee that will decide on the revenue and expenditure proposals.”

Thambo countered that Parliament itself must provide alternative proposals.

“It’s now clear what Honourable Beesley is proposing is not in the legal framework that guides us as the committee,” he said, adding that the committee could not simply send the fiscal framework back to Treasury.

“It’s not a soccer ball, it’s with us now. We can’t amend it with the conditionality that within 30 days we must get another proposal.”

VAT hike to take effect

ANC MP Lusizo Makhubela insisted that the committee accept the fiscal framework as it stands and return it to Treasury to formulate alternative revenue proposals.

Sekoati emphasised that, regardless of the committee’s stance, Treasury must play a role in identifying new revenue-raising measures if the VAT hike were to be removed.

“It is very much a practical way of actually dealing with this matter,” he said.

Additionally, Van Rooyen pointed out that, under section 7(4) of the VAT Act, the VAT increase would take effect as planned on 1 May, even before Parliament passes the necessary legislation.

“[Treasury] is preparing to give effect to that announcement,” he said.

The former finance minister added that this particular section should be amended.

“That provision is rendering us useless as Parliament,” Van Rooyen remarked.

By law, the finance minister must have two days to respond to any proposed changes to the fiscal framework.

This means Parliament would need to postpone Wednesday’s scheduled vote.

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