The fallout in the government of national unity (GNU) around the planned value-added tax (VAT) increase has forced the National Treasury to go back to the drawing board regarding the 2025 national budget, and the DA is suspicious that the ANC could seek to bring the wealth tax option back to the table.
Cabinet is expected to continue consultations on Wednesday to find a mechanism that will be supported by the majority of the GNU parties.
Besides increasing VAT, Treasury has the option to increase personal income, hike corporate taxes, or introduce a wealth tax.
The last two options, which could be seen as unpopular, involve either implementing further austerity measures or borrowing more.
A DA insider told Sunday World that a suggestion by the ANC to introduce a wealth tax or increase corporate tax would be a way to settle a score with them after the Budget Speech was unexpectedly halted on Wednesday.
The DA is strongly opposed to any tax increases.
Among the other options touted to boost the public purse is a clean-up of the social relief of distress grant to save up to R20-billion.
A cabinet insider said the government could save up to R20-billion of the total R47-billion per annum for the grants.
“There are people receiving these grants who do not qualify,” said the source.
The South African Revenue Service (Sars) is lobbying for funding to improve collection, but critics argued that the revenue would only be realised in the next financial year.
“The problem in SA is that we have a very low tax base. Even if you say you are going to collect more, that would only result in Sars trying to squeeze ordinary people for more tax, which is unsustainable.”
The ANC’s fiscal policy, according to its 2022 economic transformation policy documents, is firmly against borrowing more money and instead encourages looking into the introduction of a wealth tax. These include estate duty, donations tax, capital gains tax and proper-ty rates.
There has been widespread backlash from organisations and individuals calling for a more equitable system.
Rise Mzansi leader Songezo Zibi believes that Treasury should either increase taxes or find another instrument to generate revenue. Zibi further mentioned that cutting costs was the most prominent suggestion coming from GNU partners.
On the morning of the budget, the cabinet held a meeting where the final speech was presented to ministers. However, ministers belonging to the DA, Patriotic Alliance, and others raised alarm bells over the VAT hike.
From the ANC, justice minister Mmamoloko Kubayi, electricity minister Kgosientsho Ramokgopa, and water and sanitation minister Pemmy Majodina fiercely contested the proposal.
President Cyril Ramaphosa said the GNU had not collapsed, despite parties’ differences playing out in the public domain.
