The Institute for Economic Justice (IEJ) has welcomed the decision to reverse the VAT hike, which it says is a regressive tax that would have disproportionately harmed the poor, low-income workers and the struggling middle class.
“We caution that this reversal should not open the door for budget cuts as appears to be the National Treasury’s preference.”
It said while begrudgingly conceding on the issue of the VAT hike, the National Treasury and finance minister Enoch Godongwana appeared to double down on their ideological rejection of progressive revenue alternatives.
“This flies in the face of evidence presented in parliament by the IEJ and other civil society organisations, as well as by political parties, which show that many alternatives are readily available.”
The IEJ said the 0.5 percentage point VAT increase, at best, would have secured R13.5bn in revenue, which was a tiny 0.5% of the national budget.
IEJ welcomes government's decision to reverse 'regressive' VAT hike
'Other immediate sources of revenue include tapping into the Gold and Foreign Exchange Reserve Account'
Image: Esa Alexander/Reuters
The Institute for Economic Justice (IEJ) has welcomed the decision to reverse the VAT hike, which it says is a regressive tax that would have disproportionately harmed the poor, low-income workers and the struggling middle class.
“We caution that this reversal should not open the door for budget cuts as appears to be the National Treasury’s preference.”
It said while begrudgingly conceding on the issue of the VAT hike, the National Treasury and finance minister Enoch Godongwana appeared to double down on their ideological rejection of progressive revenue alternatives.
“This flies in the face of evidence presented in parliament by the IEJ and other civil society organisations, as well as by political parties, which show that many alternatives are readily available.”
The IEJ said the 0.5 percentage point VAT increase, at best, would have secured R13.5bn in revenue, which was a tiny 0.5% of the national budget.
EFF calls for resignation of Godongwana and Treasury DG after VAT hike reversal
“It has recently emerged that the revenue overrun collected by Sars (of about R9bn) alone, without further revenue or budget cuts, largely fills this hole.
“It also highlights the failure by the National Treasury to find innovative ways to raise revenue that can immediately unlock resources to further finance essential services and expand public investment,” the IEJ said.
The organisation said there were a number of immediate sources of revenue. These included:
The IEJ said that over the medium term, other measures, including a wealth tax, social security tax, and financial transactions tax, are available that could generate significant revenue and reduce inequality.
TimesLIVE
READ MORE:
‘There won’t be a VAT increase because of MK Party’: Shivambu claims credit, calls for Godongwana’s resignation
ANALYSIS | Godongwana's VAT U-turn raises difficult legal questions
GNU parties fuming after DA claims victory over VAT hike reversal
VAT hike reversed, spending cuts now on the cards
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
News and promos in your inbox
subscribeMost read
Latest Videos