Parliament has agreed on the VAT increase, but still feels there are more ways to assist poor South Africans.
After three sets of public hearings, Parliament’s Standing Committee on Finance has accepted the 1 per cent value-added tax (VAT) increase.
The committee previously expressed serious reservations with the increase, saying it would have a negative impact on the poor and lower-income earners, whose pockets have already been hit hard by fuel hikes and the general cost of living.
“The pressures have become more glaring following the introduction of the Medium Term Budget Policy Statement (MTBPS), which estimated 0,7 per cent economic growth,” Committee Chairperson, Yunus Carrim said.
The committee believes the decision should be reviewed in 2021, following an evaluation of the impact of the rate on revenue collection and the poor.
Former minister of finance, Malusi Gigaba, made the VAT increase announcement at this year’s budget speech, in April.
The committee is satisfied with the zero-rating of white bread flour, cake flour and sanitary pads, as well as the decision to provide free sanitary pads to learners.
However, it believes that there can be more targeted expenditure to cushion the effects of VAT on the poor. This could include increasing the allocation of free water and electricity to indigent households and vouchers for uniforms for learners at no-fee schools for locally produced school uniforms.
“More than ever, parliament and government have to ensure that more revenue is secured through considerably strengthening capacity at the South African Revenue Services to raise more revenue,” Carrim said
He elaborated: “Drastically reducing wasteful expenditure and more effectively tackling the illicit economy and corruption, more revenue will also flow from investment, economic growth and job-creation.”