ANC members of Parliament’s standing committee on finance did not support an increase on Value Added Tax (VAT), according to ANC MP and chair of the committee Yunus Carrim.
In an interview with Radio 702, Carrim revealed that ANC members were worried about how the VAT hike would affect poor people, who will bear the brunt of the increase. Finance Minister Malusi Gigaba announced during his budget speech on Wednesday that VAT would increase from 14% to 15% from April 1.
“We as the ANC are also very concerned as our allies – Cosatu, the SACP and the labour movement and civil society – about VAT. We didn’t want it particularly, in fact we’re glad it’s not 2%,” Carrim said.
He added that there were concerns in the committee that national treasury has not yet assessed the consequences of the increase.
“We’re worried about whether national treasury has done an impact study to show its effect on the poor and lower income earners,” he said.
Although the budget speech is presented by Gigaba, it contains input from the ANC national executive committee, members of Cabinet and President Cyril Ramaphosa. Carrim said that the budget is a “collective effort” and discussions on have taken place at the separate ANC NEC and Cabinet lekgotla in July 2017 and January 2018.
“Because of the new circumstances, challenging as they were, obviously the new president had some hand in shaping it,” he said.
Opposition parties have criticised the VAT increase as regressive, because it will increase the prices of food items and other necessities which are not exempt from the tax.
Carrim said, however, that a meeting will be held in Parliament with Treasury to determine if more basic goods can be exempt from VAT. Next Wednesday there also will be public hearings in Parliament where citizens can share their concerns, he said.
But Parliament still has the authority to refuse to accept the proposal of VAT increase. According to Carrim, the committee is worried about what measures will be put in place to plug corruption.
“We want to know what exactly is this [VAT] money going to be used for. Shouldn’t we do more to erode the slop and wasteful expenditure? Shouldn’t we do more tackle corruption which will bring a lot more returns to government’s coffers?” he said.
“At the end of the day, while we have strong reservations about the VAT, we want to know what other things can be done to secure revenue through wasteful irregular corrupt activities being drastically reduced.”
Carrim also criticised Parliament for not abiding by its mandate to hold government to account when there are allegations of corruption against the executive.
“We can’t fold our arms and just criticise government. Partly, we are where we are because we as Parliament have not fully fulfilled the role that’s defined for us in the Constitution, the law and the rules of Parliament. So we must take some responsibility for this,” he said.