It is impossible for the VAT increase announced by former finance minister Malusi Gigaba to be reversed before it is due to come into effect on April 1, Business Day reported on Monday. There have been widespread calls for government to reconsider the VAT hike, or at least to implement measures to cushion the poor from its impact, but it is legally and impractically impossible to do this before April 1.
According to Business Day, the VAT increase takes effect from the date announced by the finance minister and applies for 12 months afterwards, subject to Parliament agreeing to it through the Rates and Monetary Bill. That bill will only be processed later this year, however, and it is only through that bill that the increase could be reversed.
The chairperson of Parliament's finance committee, Yunus Carrim told Business Day that even if the committee rejects the VAT increase through its "fiscal framework report", the bill will still come into effect on April 1.
"We need to process the Rates and Monetary Bill, which deals directly with the VAT increase," he reportedly said.
The National Assembly is due to vote on the fiscal framework on Wednesday.
"Obviously, we understand the anger of people about the VAT increase and we will continue to engage with them. There will be major hearings on the Rates and Monetary Bill beginning on April 14. Between now and then, our committees have proposed that National Treasury consult fully with labour and other civil society organisations and report back on this on April 18," Carrim reportedly said. The Davis Tax Commission has also been invited to the hearings, he added.
Business Day reported last week that Cabinet is considering a proposal to expand the list of food items exempt from the VAT increase to further cushion the poor. Communications minister Nomvula Mokonyane reportedly said a team of ministers led by finance minister Nhlanhla Nene was looking into the proposal.
On Friday, National Treasury reportedly told Parliament that there would be further engagement on the VAT increase, according to Daily Maverick. During committee hearings last week, unions, civil society organisations, churches and NGOs all rejected the VAT hike.
The DA also rejected it, and reportedly commended raising R122 billion by reducing the size of cabinet, cutting foreign ministries and improving the efficiency of the provincial legislatures.
The finance committee is likely to approve the 2018 budget proposals, albeit cautiously, Daily Maverick reported.
National Treasury officials told the committees that while the increase was not desirable, it was the only way to plug the hole in the budget without hurting economic growth, according to Eyewitness News (EWN).
Officials reportedly said that increasing other taxes is not sufficient as it will not raise enough money, and the amount raised would be less certain. Treasury has reportedly suggested that the Davis Tax Committee should be asked to convene a panel of experts and hold public hearings on the increase.