The African Christian Democratic Party (ACDP) is extremely disappointed with the proposed 1% VAT increase to 16%, spread over two years, despite widespread opposition to a VAT increase. This will place additional pressure on hard-pressed businesses and households, despite the addition of new food items to the basket of goods that are zero rated.
In addition to the VAT increase, personal income tax brackets and rebates will not be adjusted for inflation for ‘bracket creep’ which places a further burden on taxpayers.
Taxpayers are correctly demanding value for the taxes they are paying, which they are not receiving, with renewed power outages, continual water shortages, and dysfunctional municipalities resulting in poor service delivery.
Instead of increasing taxes, wasteful and excessive government expenditure such as the bloated cabinet and departments can and must be reduced.
In addition, the Hawks, SIU and NPA must be given additional resources to collect the billions of rands stolen through state capture and corruption. SARS can and should also collect the billions owed to it by giving it extra resources.
Economic growth for last year was a very low 0.6 percent of GDP, far too low for much needed job creation and increased revenue collection. Between 3 and 5 percent growth is needed. However, National Treasury expects growth to be 1.9% of GDP for 2025/2026. This projection may be unrealistic given the various domestic and global challenges, particularly the distinct possibility that the African Growth and Opportunities Act (AGOA) will not be extended by the United States and that tariffs will be applied, which will severely impact our agricultural, automotive and manufacturing sectors. The diplomatic differences with the US must be resolved expeditiously.
The budget deficit of 5% of GDP will result in more government debt and debt service costs. Debt service costs for 2025/26 will reach R424.9bn or 22 cents of every rand of revenue raised and will crowd out expenditure on other much-needed budget items, such as health, education, and fighting crime.
The solution is higher economic growth which can be achieved through accelerated structural reforms in the energy, logistics and water sectors, involving the private sector where necessary.
The trade-off for the increase in the VAT rate may be that while ‘sin taxes’ on tobacco and alcohol are increased, the general fuel levy, the Road Accident Fund (RAF) levy and the customs and excise levy are not increased.
The ACDP will be closely studying today’s Budget proposals and recommendations.
