VAT increase: DA calls for 'trimming the fat' instead

Cape Town - There is a way government can access an additional R112bn in revenue instead of increasing VAT by 1% to 15%, DA leader Mmusi Maimane said on Tuesday.

He spoke during a during a march to National Treasury in Tshwane to hand over a memorandum on behalf of the party.

The DA rejects the increase of VAT from 14% to 15% as announced in Budget 2018 and aimed at plugging an expected revenue shortfall of about R50bn.

According to the DA, the VAT increase, along with the 52 cents a litre hike in the fuel levy, will actually have the biggest impact on poor South Africans, who spend by far the biggest part of their income on food and transport. Maimane would rather like to see what he called "wasteful spending, populist policies and a massively bloated government" addressed instead.

He pointed out that the "R50bn hole" is projected to become a R70bn hole in 2019 and a R90bn hole in 2020.

"Are we going to push up VAT every time we can’t balance the books?" asked Maimane.

He claimed the DA has found a way to save the money needed and prevent the VAT increase without hurting the poor and without putting the country deeper into debt.

"The answer lies in trimming the fat – in cutting spending where we can afford it and, very importantly, where it won’t hurt service delivery," said Maimane.

"By slashing the funding to provinces and municipalities for school infrastructure projects and human settlements programmes, and by cutting 2 000 personnel from the police service, it is only the poorest communities who will pay."

Maimane claims that before the 2018 Budget Speech he informed then finance minister Malusi Gigaba about where he could find R112bn "without punishing the poor".

"We have one of the largest cabinets in the world, and we have just about the most foreign missions in the world. Why? Because that’s how the ANC rewards cadres. Ministers, deputy ministers, ambassadors and all the other positions created by this enormous government – these are all part of an elaborate loyalty reward scheme," claimed Maimane.

"The fact is, we don’t need half of them. We can start by firing the leftover Gupta ministers that the President failed to fire, like Malusi Gigaba and Bathabile Dlamini. We can trim our Cabinet down to 15 ministries and we can cut our foreign missions by 69. That alone will save us close on R18bn."

Maimane also claims the public sector wage bill needs to be looked at.

"By implementing a one-year wage freeze for public service office bearers, including local and general government employees, and by forgoing performance bonuses in government, we can save over R60bn," he said.

In his view, a further R17bn can be saved over the medium term by withdrawing from the New Development Bank.

Lastly, he wants the spotlight on state-owned enterprises (SOEs) and the parcels of government land that aren’t suitable for housing development.

"Whatever is not strategic and whatever we don’t need, we must sell off or lease out," he said.

He called on Finance Minister Nhlanhla Nene to reverse the VAT increase and to find the necessary money in the budget items as outlined by the DA.

Nene said on Monday that government will continue to hold talks with stakeholders in a bid to soften the blow for the poor from the impact of the VAT increase which comes into effect next month.

VAT reactions

Fin24 reported earlier on various experts' reactions to the VAT increase.

Marilize Neethling, tax consultant at Mazars, said it seems as though tax administration and compliance have taken a back seat in the ongoing struggle to fund the revenue shortfall in Budget 2018.

She described the increase in VAT rate as a massive administration headache for VAT vendors. In her view, it will increase costs and the time needed by accounting staff when processing VAT reconciliations in the coming year.

Labour expert Terry Bell recently wrote that even elements within the ANC have joined a labour movement united with human rights organisations that are up in arms about what they decry as an attack on the poor in the latest budget because of, among other things, the 1% increase in VAT.

Fin24 reported last week that Cabinet is considering expanding the list of zero-rated goods, following concerns raised over the increase in the VAT rate.

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