DA responds to ANC’s threat to approach EFF to get budget passed

The DA is standing firm on zero VAT increases and has instead proposed a range of spending cuts.

Several political parties, including the DA, objected to Finance Minister Enoch Godongwana’s proposal to raise the VAT rate to 17% from 15%.

This resulted in Godongwana not presenting the budget as scheduled last month, which was the first in the country’s history.

The budget is now set for 12 March.

‘Risking SA’

On Sunday, the ANC said it may consider leaning on the EFF to get Godongwana’s budget over the line.

Treasury is suggesting a 0.75% VAT increase, but DA spokesperson on finance, Dr Mark Burke, is adamant that such an increase would negatively affect those already struggling to make ends meet.

“It is a shame that the ANC is willing to risk South Africa’s economic stability in a desperate attempt to force a tone-deaf 0.75% VAT increase down the throats of South Africans.

“The DA refuses to be held hostage or intimidated by the ANC’s blatant threat to approach the EFF to pass this VAT-based budget. This is not responsible or collaborative governance—it is reckless and places further strain on the economy,” Burke said.

ALSO READ: ANC’s VAT push ‘may risk GNU’

‘Government inefficiency’

Burke added that “government inefficiency is not hard to find or eliminate.”

“National Treasury is already aware of many areas. In the 2020 Supplemental Budget, to address a national emergency, the Treasury temporarily stopped allocating resources to programmes with a history of poor performance.

“Contrary to the ANC’s false narrative, we don’t have a revenue problem, it’s a problem of political will,” said Burke 

‘Middle ground’

At a special Cabinet meeting last Monday, Ramaphosa backed proposals for a “middle ground” approach to increasing value added tax between 0.5 and a full percentage point. President Cyril Ramaphosa and Godongwana are said to have used a paper written by UCT professor Haroon Bhorat to argue for a VAT increase, the Sunday Times reported.

In the paper, Bhorat argues that a VAT increase will not necessarily harm the poor as there is an extensive basket of zero-rated goods.

Vat revenue

He argued that VAT is the second most important source of revenue in SA, after personal income tax, which accounts for about 40% of total government revenue, and that claims that a VAT increase was

Bhorat’s paper said it is understandable why the Treasury opted for an increase in VAT instead of company and personal income taxes. The latter two, he said, would have an adversely negative impact on the economy, while VAT does the opposite.

ALSO READ: ANC threatens to approach EFF to get budget passed — report