JOHANNESBURG - The poor will bear the brunt of a potential increase in Value-Added Tax (VAT), warns Wayne Duvenage, CEO of the Organisation Undoing Tax Abuse (Outa).
Reacting to reports of a possible two-percentage-point hike, Duvenage said the increase would drive up the cost of living, fuel inflation, and reduce job creation - ultimately worsening unemployment.
He said VAT is regressive tax and should be the last resort government should turn to in order to increase tax revenue.
Duvenage’s main criticism of government is that rather than trying to increase revenue in this manner, they should rather reduce expenditure.
Outa’s stance is that the money is available if government addresses inefficiencies and wasteful expenditure in the public sector.
The Outa CEO also argued that there is little revenue to be gained by taxing businesses or the rich more. Increasing the corporate tax rate would only push these businesses to find ways to avoid it, like seeking tax shelters overseas.
The Finance Minister, Enoch Godongwana, was expected to deliver the nation's 2025 Budget Speech today, outlining the government's financial, economic, and social priorities for the year ahead.
However, for the first time in South Africa's democratic history, the speech was abruptly postponed to March, with the partners in the coalition Government of National Unity unable to come to an agreement regarding a proposed VAT increase.
By Zandile Khumalo