MK Party predicts fiery special cabinet meeting, says it will reject any VAT hike

The MK Party is expecting President Cyril Ramaphosa's special cabinet meeting to resolve to increase VAT by one percentage point instead of the proposed two percentage points, its secretary-general Floyd Shivambu says.

Shivambu said the MK Party will not support a budget that is anti-poor. 

Ramaphosa called a special cabinet meeting on Monday afternoon after the postponement of finance minister Enoch Godongwana's budget speech last week. Cabinet members from the government of national unity (GNU) parties will share ideas on how the government can fill the R60bn revenue shortfall. 

During a media briefing on Monday, Shivambu said Ramaphosa's government was further impoverishing the poor. He said the MK Party believed the government should pursue the build, operate, transfer model and work with China, Russia and India to build infrastructure.

“I think there's an issue which has not been resolved, which was raised even in different platforms that for a government to be able to collect revenue, there must be a base upon which it collects revenue from, that is the economy. And if the tax base is eroded in terms of its activities, the revenue that the state collects will be much lesser,” he said.

The tax base gets eroded through transfer pricing and illicit financial flows, where the major multinational corporations do not pay the taxes that are due to South Africa due to engaging in the practice and maladies of transfer pricing, he said.

“So if we were to check now the revenue projections, where the shortfalls came from, they came from mostly the mining sector, because almost all the companies that are involved in the mining sector, are involved in transfer pricing.”

The Eskom Debt Relief Amendment Bill, which would have formed part of the interventions by the finance minister, was also flawed due to many leakages in terms of revenue collection that is supposed to be collected, he said. There are multiple interventions that can be made to resolve the revenue shortfalls that are now being shifted to the pockets of poor people.

“That is basically what a responsible government would consider, but they are possibly going to box each other and end up at 16% instead of 17% which as MK Party we must still reject with contempt, because we cannot continue to impoverish our people.

“Of course, we must expand the basket which is VAT-free — but we must also reject the increase of VAT on all the basic goods and services as is planned.”

Speaking to the media on the sidelines of the G20 foreign ministers' meeting on Thursday, Ramaphosa defended Godongwana, stating that the cancellation of the budget speech on Wednesday was not a crisis that threatened the GNU.

Ramaphosa said Godongwana was walking a tightrope, trying to find some leeway to support the country's ambitions and ensure the budget would support growth and the livelihoods of all South Africans.

The president has called the postponement a “hiccup” adding that the GNU will sustain this and continue working.

The Sunday Times reported this week the ANC did not want to hand the DA a public relations victory. “The mistake is if we cancel this VAT [increase] completely and come back with something, that will make the DA celebrate,” said a senior ANC leader.

“Then it will mean the DA controls the budget. If we change from VAT to something else, it must be something you think is going to work but also is not determined by the policy choices of the DA.”

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