DA Submits Tax Reform Proposals to Bolster Growth and Jobs

Issued by Mat Cuthbert MP – DA Head of Policy
26 Nov 2024 in News

Note to Editors: Please see attached soundbite from Mat Cuthbert MP

The Democratic Alliance (DA) has submitted our tax reform proposals for the 2025 Budget Review in response to a call from the National Treasury. Our proposals centre on three key changes that would provide relief to low-income households and promote much-needed economic growth and job creation.

The DA has long advocated for various reforms to our tax system – which would serve as low-hanging fruit to kickstart our economy, provide relief to low-income households and create a conducive economic environment for job creation. The DA’s three proposals submitted today, which seek to achieve these goals, are the following:

Expanding the Zero-Rated Food basket

In line with our 2024 National Election Manifesto, the DA proposes that the zero-rated food basket be expanded to include bone-in chicken, beef, tinned beans, wheat flour, margarine, peanut butter, baby food, tea, coffee and soup power. These items are proposed for inclusion, as they would improve nutritional intake for low-income households.

The zero rating of these food items will provide much-needed relief to low-income households, who often spend relatively high proportions of their income on these proposed zero-rated items. By making these items VAT-free, the government can improve food affordability for all South Africans, reduce household financial burden, and address food poverty.

Repealing the Sugar Tax (Health Promotion Levy)

The sugar tax does not enable inclusive economic growth and job creation in South Africa. There is a lack of evidence that the tax has achieved its objectives of reducing diabetes and obesity rates, while the tax has an adverse economic impact on the sugar industry. The sugar tax reduces the competitiveness of our sugar industry, harms small-scale and commercial sugar farms and decreases job security for agricultural workers.

The effect of sugar taxes on the economy is being felt most severely in rural communities, where sugarcane production provides jobs in areas where opportunities are often hard to find. Studies have further shown that the sugar tax has destroyed more than 16 000 sugar industry jobs and resulted in a cumulative reduction in GDP of R2 billion.

Therefore, we urge the Treasury to review the sugar tax and its role in decimating the sugar industry and not achieving its intended public health objectives.

Reviewing the Fuel Price Structure

The DA calls for an urgent review of the fuel price structure, coordinated by the National Treasury, to provide relief to consumers and businesses.  While fuel taxes generate significant revenue for the government, they disproportionately burden consumers and businesses at a time when economic growth and job creation are desperately needed.

The fuel tax increases transportation costs, particularly within the trucking and logistics industries, which results in increased costs for small businesses in transport-reliant sectors such as agriculture and delivery services. These increases in input costs are ultimately passed on to consumers through price increases, driving up the cost of living for all South Africans. Finally, transportation costs are also increased for households due to higher fuel prices, making commuting to workplaces or job interviews higher.

We urge the National Treasury to consider these three tax proposals in their 2025 Budget Review, which aim to provide relief to the hardest hit South African consumers and businesses.

As part of the Government of National Unity, we have been at the forefront of driving the growth and jobs agenda. These three tax proposals will build on the successful reforms tabled in the Medium-term Budget Policy Statement.