Top judge takes swipe at VAT hike decision
THE proposition of a willing buyer and willing seller was not supposed to be the default expropriation position, Judge Dennis Davis, one of the drafters of the constitution, said in Johannesburg in midweek.
The judge, who heads the Davis tax committee, also tore into the announcement that the value-added tax (VAT) rate would rise by one percentage point, saying the government could have avoided this if it had a better grip on the Gupta family’s alleged state capture and billions of rand in runaway fruitless and wasteful expenditure.
He said the land debate should en- compass spa- tial align- ment of cities, which reflected apartheid-era geography. This misalignment would affect economic growth adversely and the potential of small and medium enterprises (SMEs).
Davis was addressing delegates at the Small Business Indaba in Bryanston.
Trade unions and civil society have bemoaned the implications of a VAT increase on poor households, but the Treasury insists it will be implemented from April 1.
Former finance minister Malusi Gigaba announced the VAT increase in the February budget, saying the government expected to raise R22billion with it.
Davis said that if there had not been corruption and state capture, a VAT hike could have been avoided.
“Ask yourself, would we really [have] needed to collect R20-billion in VAT if we, even to a small extent, reduced corruption? To put up VAT … is difficult.”
The auditor-general’s office had also highlighted unauthorised expenditure amounting to R60-billion-R80-billion in the public sector. “If we cut that down by 25% … if we said, ‘Okay, we’ll give you R40-billion to waste and we’ll save R20-billion’, we wouldn’t have had to increase VAT.
“That is why we can’t talk about small and mediumsized businesses without looking more holistically at the location of where we are in SA.”
Davis said that while the climate under President Cyril Ramaphosa suggested that SA had turned a corner, it was “perfectly obvious we’ve got a helluva long way to go”.
His comments come as the Treasury intends to proceed with a plan to convene a panel of experts to investigate the possibility of expanding the basket of zero-rated food items to reduce the effect of the VAT hike on low-income earners.
Research showed that SME investment was down from 12.9% in 2010 to 8.5% in 2012.
Bernard Swanepoel, Small Business Indaba chairman, said entrepreneurship by 25 to 34-year-olds fell more than 40%. SMEs faced a concentrated market, making it hard for new entrants to compete.