Sceptical MPs put a sell-by date on tax hike

ANC members of Parliament’s finance committee are not in favour of the one percentage point hike in the value-added tax (VAT) rate continuing beyond April 2019.

Head of the ANC study group in the committee Thandi Tobias said on Wednesday the ANC recognised the need to fill the revenue shortfall of R48bn in the current year but did not support the continuation of the increase longer than one year. She recognised that there was little that could be done in the current financial year to reverse it.

The one percentage increase in VAT will raise about R23bn.

“As the ANC going forward we will not advocate for another imposition of VAT from next year ... we are going to insist on not implementing it.”

Committee chairman Yunus Carrim has also expressed grave concern about the impact of the hike on the poor.

The finance committee on Wednesday held a public hearing on the draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill, which includes a provision on the VAT increase.

Civil Society Coalition spokesman Neil Coleman also argued for it to be reversed from April next year.

Treasury deputy directorgeneral Ismail Momoniat said any future tax proposals for 2018-19 would depend on the outcome of economic growth in the current year and expenditure trends. The immediate issue was how to minimise its effect on the poor.

Earlier, Judge Dennis Davis told members of the finance committee that it was critical for the independent panel appointed to investigate the zero rating of VAT to examine whether there were other ways in which the poor could be assisted so that they derived the full benefit of the R23bn instead of sharing this benefit with the well-off.

Davis, who heads the Davis tax committee, cited school nutrition schemes in rural areas as an example of what could be done. He said zero rating benefited rich people.

The panel chaired by Prof Ingrid Woolard will look into whether the 19 zero-rated items benefit the poor and whether the list should be extended to include other goods.

One of its additional terms of reference is to explore whether the outcome of zero rating of food items cannot be better achieved by a targeted government expenditure programme.

Davis defended the increase in VAT on the grounds that it was the least economically harmful of the possible tax raising options. “We had run out of road. The question we were faced with was where else to go.”