VAT increase in SA irks unions

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October 25, 2017. WORDS Finance Minister Malusi Gigaba during his Medium-term Budget speech in parliament in Cape Town on Wednesday Pic: Esa Alexander. © The Times
South African Federation of Trade Unions (Saftu) leadership will meet next month and could recommend strikes to protest against the hike in the rate of value-added tax (VAT), general secretary Zwelinzima Vavi has said.
“I will personally recommend that we strike against the increase in VAT,” he said.
Finance Minister Malusi Gigaba said last week that the government was going to hike the rate of VAT for the first time in 25 years to help plug a R48 billion shortfall in revenue collections and pay for free tertiary education for poor and lower middle class households.
VAT was first introduced in 1991 at a rate of 10 per cent before it was increased to 14 per cent in 1993.
Vavi said the hike in the rate from 14 to 15 per cent was ‘extremely disappointing’.
“The same people, including now President Cyril Ramaphosa, that backed the hike in the rate of VAT were the ones that had fought the apartheid government’s move to introduce VAT in the early 1990s,” he said.
“Former presidents Nelson Mandela and Thabo Mbeki had never touched the VAT rate because they knew what punishing effect it would have on the poor.”
He said it was disingenuous for Gigaba to suggest that the wealthiest 30 per cent of households contributed 85 per cent of the VAT revenue as a means of showing that the rate wouldn’t “punish the poor”.
Sizwe Pamla, a Cosatu spokesperson, said he couldn’t say what action the trade union federation might take against the hike in the rate of VAT.
The Cosatu central executive committee would meet from February 26 to 28 and discuss the latest budget speech.
In response to the VAT rate hike, Cosatu said this week: “We … believe the decision to increase VAT is regressive in nature and does not address the circumstances in which South Africans find themselves.”
Dennis George, Federation of Unions of SA (Fedusa) general secretary, said the hike in the rate of VAT was “very unfortunate”.
It would be okay if tax rates increased and government services improved too, but this was not the case.
However, when it came to things such as security, education and health, government services in this regard were poor and ordinary citizens needed to buy private services because the quality of government services was so poor.
The government was also one that couldn’t be trusted./fin24

 

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