A “yes” vote to increase VAT is a “yes” vote to “tax” the poor

Issued by Alf Lees MP – DA Shadow Deputy Minister of Finance
20 Nov 2018 in News

The following speech was delivered today in the National Assembly by DA Shadow Deputy Minister of Finance, Alf Lees MP.

The South African economy is in such a mess as a result of a decade of ANC mismanagement that the ANC is now taxing the poor in order to fund their big black fiscal hole.

By increasing VAT to 15%, the ANC is using poor South Africans to bail out the ANC economic mismanagement and disaster.

One of the main ways that Jacob Zuma’s good friend Tom Moyane manipulated revenue figures was to withhold VAT refunds. This was done by both using and abusing the time periods given to SARS to do verifications and audits.

It was clear from the flood of complaints from taxpayers that the economy was being negatively affected by the non-payment of VAT refunds to businesses, especially small businesses. This led to some businesses shutting down and people losing jobs.

In order to ensure that a similar campaign does not recur, it is vital that the Nugent Commission determines whether or not the VAT refund delays were deliberate manipulation or were simply inappropriate application of tax law provisions. There can be no question that the refund delays must never be allowed to happen again and, if needed, the tax laws must be amended to prevent it.

The increase in VAT to 15% was budgeted to raise additional revenue of R23 billion in the 2018/19 financial year. However, in practice it will raise no additional revenue as R20 billion will be used to clear the backlog in VAT refunds and R2.7 billion will go towards extra zero-rating and free sanitary pads.

There was universal condemnation of the increase of VAT and much bluster from the ANC themselves opposing themselves. This included repeated reservations about the VAT increase expressed by the Chairperson of the Standing Committee on Finance, Hon Yunus Carrim.

But as time passed, the bluster subsided and the ANC spin took over.

First, a commission of inquiry came up with weak recommendations that were either not implementable, such as zero-rating school uniforms, or were of marginal benefit to the poor.

Then the ANC decided that white bread flour, cake flour and sanitary pads would be zero-rated.

Finally, a vague decision that free sanitary pads would be provided at fee-free schools. Who knows when these free sanitary pads will actually be provided, given the ANC history of failing to even provide textbooks to poor learners?

What this means is that the extra revenue of R23 billion from the 15% VAT will be eaten up to:

  • Clear VAT refund backlogs of R20 billion; and
  • Provide additional VAT zero-ratings of R2.7 billion

In the end, the VAT-increase hardship already inflicted on poor South Africans since March 2018 cannot be reversed. There was no need to implement such a dramatic tax increase without a proper consultation process.

A “yes” vote to increase VAT is a “yes” vote to “tax” the poor!