Madam Deputy Speaker,
The ACDP appreciates that this is a very complicated and complex matter. However, let us make it very clear that we have some serious concerns with the report, and we are concerned from a legal perspective as to the process that was followed. Surely a Senior Council opinion should have been obtained given the fact that, in all likelihood, this will end up in the Courts.
Additionally, if one considers that the fiscal framework is premised on economic growth of 1.9%, last year’s growth was a dismal 0.6%: half a per cent lower than Treasury’s own projection. How realistic the is a 1.9% projection?
Even the Standing Committee on Finance agrees that Treasury’s growth projection is “too optimistic” – yet we are asked to accept this fiscal framework. Treasury must improve the accuracy of its forecasts. And even on this dubious forecast, gross loan debt is set to reach a staggering R6 trillion or 76.2% of GDP. Debt service costs are set to reach R424.9bn or 22 cents of every rand of revenue collected.
This is clearly unsustainable and crowds out much needed spending on other budget items such as education, health, crime fighting and job creation.
The ACDP also does not believe that the full implications of global trade uncertainty and tensions with the USA have been properly factored into the projections. AGOA trade benefits are seriously at risk and very little is being done to remedy the situation.
The ACDP is also very clear (as are most parties here) that we do not accept the VAT increase. Yesterday, while the Committee was sitting, SARS announced that they had collected an extra R8.8bn. Surely the additional amount which the 0.5% VAT increase would have collected, which is about R4bn after the additional R8.8bn is taken into account, could have been collected elsewhere without raising the VAT rate.
We also do not support the fact that personal tax brackets were not increased for the so-called ‘bracket creep’. And we seriously question from a legal perspective whether these two aspects have been scrapped as has been alleged.
We firmly believe that South Africans are cash-strapped already according to the Laffer Curve. Simply put this curve shows that hiking taxes beyond a certain point can lead to diminishing tax returns as it may disincentivise work, entrepreneurship, and investment or lead to immorality and non-compliance.
While the budget did not contain direct personal income tax increases, the fact that personal tax brackets and rebates will not be adjusted for inflation for 2025/26 results in effect to a tax increase (which will, according to National Treasury, raise revenue of R19.5bn).
The ACDP believes that further taxes will hurt the South African economy. Government should rather focus on cutting its spending.
What is required is a pro-growth budget that cuts unnecessary spending and wastage, makes investment and job creation the priority and removes public enterprises from state dependency. Spending reviews must go beyond financial analysis to include programme and structural reform and be implemented as a matter of urgency; the efficiency and effectiveness of spending must be dramatically improved; underperforming and unnecessary programmes must be discontinued.
Lastly, the ACDP believes that closing the tax gap (between what is owed to SARS and what it collects – estimated to be R800bn) by only 10% would result in an additional R80bn for the state coffers which would make the VAT increase unnecessary.
We, as the ACDP, cannot support the Report. We believe that the VAT increase and other changes could have been implemented using the legislation that the Committee has at its disposal to amend the Budget.
I thank you.
