Action SA's budget proposals 'weird' and 'unlawful' say parties

Action SA explained its support for the fiscal framework and revenue proposals report that could animate finance minister Enoch Godongwana’s budget if passed because while South Africans could not afford its proposed VAT hike, the economy could not afford a delay in the budget process.

The National Assembly sat on Wednesday afternoon to consider the fiscal framework and revenue proposals report. The standing committee on finance considered the report on Tuesday in a sitting. Action SA proposed that the report be adopted with an amendment to remove VAT and personal income tax bracket creep.

In that sitting, the DA, the EFF and the MK Party dismissed Action SA’s proposal as “weird” and “unlawful” saying the report should be referred to Godongwana or rejected outright. The fate of the GNU could hang in the balance if Godongwana’s budget is impaled on the National Assembly floor.

On Wednesday afternoon in the National Assembly, speaker Thoko Didiza allowed the budget debate to go ahead, prompting the EFF to threaten legal action.

Action SA parliamentary leader Athol Trollip defended his party’s move at the Tuesday sitting, saying the decision to accept the report with amendments came from the understanding that the alternatives were a damaging VAT hike and the finance minister having to draft an entirely new budget.

“The GNU has not been able to thread that budget needle after being in government together for nine months. And the main protagonist in this conflict is the very party that was clapping like seals this time a year ago when the finance minister tabled his budget, and now they’re moaning like a drone.”

He said Action SA has been consistent in opposing VAT and personal income tax bracket creep. He said the postponement of the budget has taken two months, and in that time, the value of the rand against the dollar and the euro had deteriorated, which weighed on the buying power of household incomes.

“At the first aborted effort to table a budget, I said that the government must cut the fat and leave the VAT. Action SA chose to recommend changes to the fiscal framework rather than amend it outright because an amendment would have required the minister of finance to redo the entire budget process.”

He said the solution to South Africa’s budget gaps lay in giving Sars the capacity it needed to collect more money rather than imposing new taxes on the already heavily taxed South African public.

Freedom Front Plus MP Wouter Wessels said increasing tax in any form will not stimulate economic growth, will stifle activity, increase the cost of living, reduce incomes, jobs and investment, and increase poverty, which will reduce tax revenue. He said a tax revolt was imminent in the country.

“This fiscal framework, which still provides for a VAT increase, won’t be acceptable for the Freedom Front Plus. The fact of the matter is that we could have amended this fiscal framework and made it better. For too long parliament has functioned as a rubber stamp when it comes to the budget.”

MK Party MP Des van Rooyen said the process exposed that the National Treasury has no regard for participatory democracy, adding that the department ignored advice from MPs by pressing on with a VAT hike that would devastate poor households.

“The million-dollar question is who is National Treasury serving and supposed to listen to? If the overwhelming majority’s voice of reason is being ignored, who is the Treasury listening to?”

He urged the finance minister to consider a wealth tax, a one-year suspension of GEPF contribution, and other measures and reject the VAT hike and a revenue proposal.

DA MP Mark Burke said he considered it significant that the report was considered on the first of April, calling it a farcical day and a farcical sitting to accept a farcical report. He rejected the report as “not worth the paper it’s written on”.

“The power of the constitution and money bills act gives parliament the power to amend bad budgets. And yesterday, we had the chance and almost the numbers to amend a bad budget. We could have fulfilled our constitutional duty to do so, to protect South Africans from a budget that includes VAT increases but does not move the needle enough on growing the economy and creating jobs.

“And that chance was spectacularly squandered by Action SA, the IFP and the ANC who voted on a version of a report that only came into existence hours after the meeting and the voting had concluded ... What Action SA and the IFP did was treachery!”

EFF MP Omphile Maotwe repeated that she wrote to National Assembly speaker Thokoza Didiza to refer the report back to the finance committee, saying the decision to push the report through risk unravelling the GNU.

“The ANC, now hiding behind the so-called GNU, continues to sell out the aspirations of our people. The less said about Action SA’s misunderstanding of the legislation that guides the process and procedure to amend and approve the budget as proposed by the minister, the better. A budget is not passed based on negotiations of good faith but is a creature of statutes.”

She rounded up her contribution to the plenary with a final ultimatum: if the government wanted to press on with the budget in its current form to prepare themselves for litigation.

“Now, this is what is going to happen. If you vote for this fiscal framework and revenue proposal today, against the advice, we are going to challenge you in court for failing to follow the law that is clear and basic.”

IFP MP Nhlanhla Hadebe said it accepted the fiscal framework and revenue proposals report. He warned the DA that if they wanted to impose their views as a master plan for the entire country “they must wake up and think again”.

He acknowledged the tabling, noting the macroeconomic projections underpinning the fiscal framework required a cautious approach given global economic uncertainty.

“We support efficient government spending but remain concerned about continued wasteful and irregular expenditure. We call for a strengthened oversight mechanism to curb corruption and mismanagement, realignment of expenditure priorities to ensure increase investment in healthcare, education and job creation initiatives.”

He said any increase in taxation should be carefully assessed to avoid discouraging investment and burdening households. He welcomed the government’s expansion of the zero-rated goods list to protect vulnerable communities.

“While we support measures to curb harmful consumption of tobacco and alcohol [with] excise duties, we caution against extensive increases that might fuel illicit trade and job losses in affected industries,” he said.

Minister of sports, arts and culture and PA MP Gayton McKenzie said since joining parliament, the name of the poor was being used by “every Tom, Dick and Jabulani”, accusing the DA of leveraging acceptance of the VAT hike in exchange for an about-turn in the Basic Education Laws Amendment (Bela) Act.

 “The finance minister approached us and said we are looking at a two percentage point VAT [increase]. We immediately said that’s too much. We were negotiating, we were fighting, we were debating. We ended up at 0.5 percentage points. I can’t have it my way or the highway. So on the basis that I was willing to move from [two percentage points] to 0.5 percentage points, I am a proud member of the GNU.”

Build One SA leader Mmusi Maimane told the National Assembly that the government needed to consider more revenue-generation options such as announcing a tax on the burgeoning e-sports betting sector and leveraging South Africa’s trade relationship with the US to build gross fixed capital formation.

Rise Mzansi leader Songezo Zibi told the plenary that the can had been kicked down the road since 2019, after years of irresponsible borrowing by the government. He said the composition of expenditure was the biggest problem, as most of the government spending went to wages and servicing debt.