The Democratic Alliance has claimed credit for the about-turn by the treasury on the tax, saying its legal team had presented a strong case against the flawed parliamentary process used to adopt the fiscal framework
The ANC on Thursday welcomed the treasury’s scrapping of a proposed 0.5 percentage point VAT increase but conceded it could have handled the budget vote differently, as political parties across the spectrum claimed credit for the reversal.
In a joint media briefing with political parties that supported the passing of the fiscal framework on 2 April, ANC secretary general Fikile Mbalula said the party’s primary concern had been to protect the expenditure side of the budget.
“Overall, our viewpoint was that political parties must think of alternatives to VAT that will sustain the post-austerity cycle reflected in the budget. This is exactly what has happened, and this is the result we have come to welcome today,” he said.
Mbalula said the ANC’s position throughout was to defend public spending, adding that the coalition at the national level remained “uncharted waters” and, “if we had a wealth of experience, we may have approached this differently”.
The treasury announced shortly after midnight on Thursday that it was abandoning the planned one percentage point VAT increase over two years, opting instead to keep the rate at 15%. It said foregoing the increase would result in an estimated R75 billion shortfall, and additional revenue measures by the South African Revenue Service (Sars) may be considered to fill the gap.
In a joint statement, the parties that voted 194 votes to 182 to pass the framework hailed the VAT reversal as a triumph of collective action, while criticising the legal challenge launched against it by the Democratic Alliance (DA), the ANC’s main partner in the government of national unity formed after last year’s general elections.
“This demonstrated that no single party is the alpha and omega in providing solutions for South Africans. A collective approach by all parties represented here has put South Africa first and ensured the budget is approved,” the statement read.
The DA claimed credit for the VAT reversal, saying its legal team had presented a strong case against the flawed parliamentary process used to adopt the fiscal framework.
Its federal council chairperson, Helen Zille, said smaller parties could not claim victory for the VAT reversal because Finance Minister Enoch Godongwana had categorically stated that the VAT increase would go ahead in his answering affidavit in the court case, even with the non-binding recommendation to seek alternative sources of funding within 30 days.
Zille said while the finance minister’s legal counsel had now approached the DA for an out-of-court settlement, the party would continue with the second part of its court challenge, which contests Godongwana’s powers under the VAT Act.
The Economic Freedom Fighters (EFF), which joined the DA in the court challenge, said the fiscal framework had been adopted “illegally through deceit and lies”, and called for the finance minister’s resignation.
At Thursday’s multiparty media briefing Inkatha Freedom Party spokesperson Mkhuleko Hlengwa said the budget was a living document that must adapt to changing circumstances.
“The situation clearly shows that Sars has collected more money, and because of that, we are in a position to adjust the budget moving forward,” he said.
ActionSA leader Herman Mashaba accused some MPs of holding the budget hostage to score cheap political points and said his party had been targeted by a well-funded misinformation campaign falsely claiming it supported the VAT hike.
Patriotic Alliance deputy president Kenny Kunene accused the DA for exploiting the budget issue as leverage to push for the setting aside of the controversial National Health Insurance Act and the Basic Education Laws Amendment Act, after failing to convince its partners in the coalition government to do so.
Rise Mzansi leader Songezo Zibi warned that the treasury’s role should not be compromised over the fallout.
“This process has been about freeing the finance minister from extortion. We can now proceed with the budget without debating legislation already passed by parliament,” he said.
Mbalula echoed this, saying the ANC “believed then, as we do now, that the minister has powers to initiate and withdraw any changes to VAT in terms of the VAT Act”.
Build One South Africa leader Mmusi Maimane said his party had supported the fiscal framework because it included a broader basket of essential services that would protect vulnerable South Africans.