The South African Communist Party (SACP), labour federation Cosatu and various other unions have slammed Finance Minister Malusi Gigaba’s Budget speech as anti-poor.
Gigaba announced on Wednesday afternoon that value-added tax (VAT) would be increased for the first time in 25 years, a move some perceive as hurtful to the working class.
“Cosatu might be sympathetic with government on the need to stabilise and fix its budget crisis but we are deeply disappointed that it is doing this upon the backs of the struggling working and middle classes,” the federation said in a statement. “Government’s response to its budget problems is to take money from workers through VAT and below inflation income tax bracket hikes. This will hurt workers and their families by taking money from their pockets and making basic food and other living expenses more expensive.”
With tax collection falling short by R48-billion, compounded by former president Jacob Zuma’s announcement of fee-free higher education for disadvantaged students, government’s hand has been forced to increase the VAT rate from 14% to 15% – raising some R22-billion to plug the hole.
The SACP acknowledged the difficult position the budget was delivered from, but was highly disappointed in its final presentation.
“The SACP acknowledges that the budget announced today occurs within a very challenging situation, not least a nearly R50bn fiscal deficit, and a public debt that is simply unsustainable over the medium term,” it said. “However, we are extremely unhappy with the increase of VAT.
“It marks the possible beginnings of regressive creep. While some basic foodstuffs are zero rated, the working class and poor do not live on bread and pap alone. Children of the poor don’t go to school dressed in staple foods. It is simply untrue to argue, as the Minister of Finance did, that the 20% poorest will be unaffected by the VAT hike.”
At 15% the VAT rate still remains lower than the continent and global average rates but the government has resisted hiking the rate until now.
“This budget constitute a frontal attack on the gains of the workers,” lamented the National Education, Health and Allied Workers’ Union. “This is demonstrated by the grand standing orthodox, conservative austerity measures presented in form of budget cuts, regressive tax regime, lowering of head counts in the public service, and an affront on workers’ wages and conditions of employment.”
The SA Municipal Workers’ Union said this is not the budget they had hoped for. “Minister Gigaba has outlined plans for government to increase VAT from 14% to 15%,” a SAMWU statement said. “Despite the Minister justifying the increase by arguing that the poor will be shielded through the zero VAT rating on certain food items, we are of the view that this is not necessarily the case unless the Minister wants to tell us the poor, that we only deserve to eat dried beans and pap.”
The National Professional Teacher’s Organisation of SA, however, commended Gigaba for an “inclusive and progressive” budget.
“Naptosa noted Mr Gigaba’s motivation for the 1% increase in VAT and amendments to below inflation personal tax increases as, ‘Difficult but necessary trade-offs’, in order to educate the youth and continue to protect the vulnerable.”