Budget 2021

Cosatu warns against VAT hikes, austerity measures ahead of budget

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Cape Town - Ahead of the budget, trade union federation Cosatu has argued against raising the VAT rate and increasing income tax rates for working and middle class South Africans. 

The first budget under a Ramaphosa presidency is set to be delivered in Parliament on Wednesday afternoon. 

Economists have been raising the prospect that the finance minister will hike VAT rates to make up for a tax revenue shortfall and increased spending for fee free education for some tertiary students. 

“Cosatu expects government not to throw the working and middle classes under the bus with VAT and income tax hikes,” the trade union federation said on Monday in its pre-budget statement.  

“Cosatu will not support any attempt by government to balance budget shortfalls and deficits upon the backs of struggling workers.  Workers are not the ones who have looted Eskom, SAA and the state.”

The government should first eliminate billions in wasteful expenditure, and the National Prosecuting Authority recover “stolen” assets, it said. 

“Any increase in taxes on the poor will further condemn them to hunger and stifle economic growth.  Government must remember workers are voters and they are tired.”

The federation also said the state should increase taxes on imported and luxury goods, and “the many millionaires who find sophisticated ways to avoid paying taxes”. 

“Lifestyle audits must be conducted of the leadership of the private sector, parastatals and government to make sure they are paying their taxes in full. We cannot expect workers to be happy to pay taxes whilst politicians simply ignore SARS.”

In his maiden State of the Nation Address on Friday, President Cyril Ramaphosa announced a commission of inquiry into governance at the SA Revenue Service.

Ramaphosa said the commission, requested by the finance minister, would ensure that the credibility of SARS is restored, as well as its capacity to meet revenue targets.

“We expect clear action from government to address the collapse in leadership in SARS.  This is why we now have a budget shortfall,” said Cosatu. 

No austerity 

As in previous years, the trade union federation warned the government not to resort to austerity measures, saying these would impact the poor and working class the most. 

Instead, Cosatu called on Ramaphosa to cut the size of national and provincial cabinets, trim the perks of politicians, and halt the provision of bodyguards to all mayors and municipal speakers.

It praised Ramaphosa’s commitment to cut down on the number of government departments, but said it had to be “done in a manner that does not see any worker lose his job”.

The federation argued that austerity measures would go against the grain of efficient public services. 

"[Efficient public services] cannot be done by leaving teaching, nursing and policing and other critical posts vacant.  Teachers cannot be expected to perform in classes with 120 learners and no toilets or text books.  Doctors cannot be expected to save lives when performing 48 hour shifts,” it said.

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