Stop VAT hike presentation to parliament's finance committees

Stop VAT hike presentation to parliament's finance committees

Honourable Committee Members, my name is Nqaba Mpofu. I represent and today I speak on behalf of over 47,000 people who signed their name to the following statement:

“We the undersigned completely reject the proposed VAT increase and call on you as our elected leaders to scrap the VAT increase for 2018/2019. The Standing Committee on Finance should consider each of the undersigned names as an individual submission which categorically rejects the VAT increase in the Fiscal Framework and Revenue Proposals.

We join the call with 35 civil society organisations rejecting the VAT increase, and advocating for other ways of raising revenue include increasing personal income tax on high income earners, increasing the corporate tax and implementing a carbon tax. Increasing, sin tax and sugar taxes should also be considered. All of this should make it possible to relieve the burden on the poor, and get rid of regressive tax policies in opposition to mainstream economists who are calling for VAT increases.”

Since Monday, the number of people who want Parliament to stop the VAT hike has increased to over 54,000. Let me be clear who we represent. is an independent community advocacy organisation with over 200,000 members from every province in the country. The majority of our members are Black women from low-income communities, a constituency who will be hit hardest by the VAT hike. Our members are deeply concerned that the VAT hike will increase the cost of necessities such as sanitary products, soap, stationary, margarine and school uniforms to name a few. The poor cannot live off just 19 zero rated items, which is what PACSA will demonstrate in their presentation, and while additional funding for fee free tertiary education is welcomed, the inadequate increase in social grants will not offset how hard the proposed VAT increase will hit our constituency. Former Finance Minister Gigaba has tried to argue that a VAT increase will not affect the poor, yet we see no evidence proving this claim and our members beg to differ. The majority of our members might not have a degree in Economics but they can tell you the history of the price of soap and how it impacts their lives.

Which brings us to why the process of public participation on the budget and the proposed VAT increase is so broken: it is easier to find out how to buy a CD of the budget speech on Treasury’s website, it’s R50 by the way [1], than it is to find out about public participation, let alone having enough time, evidence and research to ensure we, the most affected by these decisions, can engage with a proposal that will dramatically impact our lives. Should our voices not be front and centre? members have campaigned with Fees Must Fall and for government intervention to lower the price of cell phone data, but this campaign, to stop the VAT hike by taxing the wealthy, is our biggest campaign yet [2]. This Committee has already interacted with some of our members when we supported HEALA’s campaign for a strong sugary drinks tax to combat non-communicable diseases, and we have welcomed the Health Promotion Levy for the positive impact it will have. But this regressive VAT increase will not create social good. In fact, as stated in a 2016 Davis Tax Committee Report, and I quote, “an increase in VAT will worsen inequality” [3].

For such an unequal society, we do not understand why the budget proposal seeks to balance the budget with a regressive VAT hike, instead of a progressive and major hike in Corporate and Personal Income Tax, not to mention property taxes and a net wealth tax? Some companies in our beloved country have been found to have engaged in corruption, collusion, tax evasion, illicit financial flows and anti-competitive behaviour. For example, Sasol currently faces a R1.6 billion tax bill from SARS from 2013 [4]. One could argue that some very well paid individuals in the private sector, with individuals in government, are the cause of our current budget crisis, not to mention those who benefited historically from colonisation and apartheid, yet it is the poor, who, through no fault of their own, will be punished the most through an increase in VAT.

With a VAT hike, the wealthy might have to make the difficult decision of opting for a bottle of 40 year old Glenfiddich whisky instead of a 50 year old bottle, priced at R600,000 at Makro [5], but for the majority in our country, the choices are much harder. It could mean a child missing school because her family cannot afford sanitary pads. Surely increasing ad valorem excise duties on luxury goods at a much higher rate than what is currently proposed, would make more sense than a VAT hike, if we are to use human dignity as a basic measure?

We are all confronted with stark inequality each day, and that’s why it is so infuriating that taxes like VAT and the fuel levy, which hit the poorest the hardest, are increasing, while taxes on the wealthy and companies are not keeping up, despite the fact they can afford it. It should be noted that it is the rich who are saying we have no choice but to make tough decisions in this economic climate, when they are in fact not the ones who will face the brunt of these decisions. This rhetoric is hypocritical when you look at the fact that Personal Income and Corporate Income Tax rates have fallen over the last three decades, not to mention that property taxes now contribute even less to the tax mix. As was stated by Thoko Madonko and Gilad Isaacs last week, “the top 10% of South Africans hold at least 90% to 95% of its wealth, and the top 1% holds 50% or more of its wealth” [6]. The legacy of colonisation and apartheid have meant extreme inequality, and to not have a net wealth tax is an injustice in itself.

The budget is supposed to renew economic growth, but it will essentially erode the spending power of the poor, and take money away from those who need it most and give it back to ‘some’ of the poor through social grants and lower costs for tertiary education. At the same time the budget proposes cuts to government spending, which will also impact the poor. Those who will be least affected by government spending cuts, and whose lavish lifestyles will buffer them from a VAT hike, will face an insignificant increase in Personal Income Tax and no increase in Corporate Income Tax. When the poor have less purchasing power, and less services due to less government spending, does that not increase poverty? Isn’t economic growth supposed to reduce poverty, isn’t this budget about economic growth? Who is paying for this economic growth?

The billion rand question is, what are our alternative sources to raise the R22.9 billion should the VAT hike be scrapped?

We recommend a major increase in Corporate Income Tax, a far greater increase than the proposed Personal Income Tax increase, the use of the carbon tax, a permanent net wealth tax, and a land property tax. The details of these, as well as other recommendations we support, will be made by organisations we have worked with including PACSA, Rural Health Advocacy Project, Dullah Omar Institute, the Institute of Economic Justice and CSID Research Programme.

While we don’t have the vast resources and expertise of Treasury, it doesn’t take a genius to see that increasing Corporate Income Tax, increasing Personal Income Tax beyond the current proposal, and introducing other wealth taxes, we could easily raise R22.9 billion. If we look at Personal Income Tax alone, raising the top three rates from 16.7% to 18%, 26% to 29%, and 37% to 41%, even if we factored in elasticity of taxable income of 35%, this proposed increase in personal income tax would raise R30.8 billion. Perhaps we could then actually explore reducing VAT? In fact, according to the Financial Intelligence Centre, nearly R60 billion left South Africa illicitly during the 2015-2015 financial year [7], while Global Financial Integrity (GFI) stated that “between 2003 and 2012...[an] estimated $122-billion [that’s US dollars] in IFFs was transferred out of the country” [8]. We know both Committees are reaching the end of your tether on the issue of Illicit Financial Flows and we are sure you agree the poor do not deserve to be punished for corporations historically not paying their fair share in tax.

We also support recommendations to reject an increase in the fuel levy, increase ad valorem excise duties on luxury goods, institute a higher VAT on luxury goods and expand zero rating to include more items, especially sanitary products, which is something members have been campaigning on. We also support reducing tax breaks that predominantly benefit higher income households, recommend a significant increase in social grants and oppose the current cuts to social spending, which will impact the poor.

Thank you, on behalf of the over 54,000 people who have joined our campaign over the last 5 days to stop the VAT increase. We appreciate the opportunity to present.




[2] 36 Civil Society Organisations reject proposed increase in VAT: Tax the wealthy to invest in our future! By AIDC. 21 February 2018.

[3] Davis Tax Committee. 2016. Macro Analysis of the Tax System and Inclusive Growth in South Africa.

[4] Paul Burkard. Sasol disputes a R1.6bn tax bill by SARS over oil procurement. Business Day, 21 August 2017.


[6] Thoko Madonko and Gilad Isaacs. No, minister. Increasing VAT was avoidable, Mail & Guardian, 23 February 2018.

[7] SA is combatting a 'scourge' of illicit financial flows. Mail & Guardian, 10 October 2017.

[8] Greg Nicolson. Parliament: Illicit financial flows and the history of disappointment. Daily Maverick, 2 August 2018.