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Cape Town - The South African Human Rights Commission has said that economic challenges that prompted the VAT and fuel levy hikes announced in the budget could have been averted if the government had earlier demonstrated better management of the economy and clamped down on corruption.
“Public and private sector corruption, according to the Auditor General, a fellow Chapter 9 Institution, costs the nation billions on an annual basis,” it said.
The commission, a national institution established to uphold constitutional democracy and human rights, said it believed a “significant portion” of the economic challenges facing SA could have been avoided had the state “demonstrated better management of the economy and demonstrated an intolerance toward corruption, inefficiency and maladministration”.
In his maiden budget delivered on Wednesday, Finance Minister Malusi Gigaba announced that VAT would increase by one percentage point from 14% to 15%.
This is the first time VAT has been raised since 1993. Increasing the tax was “unavoidable if we are to maintain the integrity of our public finances”, the minister said.
The current zero-rating on foods including maize meal, brown bread, dried beans and rice would remain, and “limit the impact on the poorest households”.
The SAHRC said it was “deeply concerned” that the VAT rate would go up, saying it was a tax that impacts the poor the most.
According to the budget, it is expected to bring in R22.9bn in additional revenue in the 2018/19 financial year.
“Further, the SAHRC is also concerned with the increase in the fuel price through the introduction of a 52 cents per litre fuel levy,” it said. “This increase in fuel price particularly impacts on the poor as it affects the price of public transport and the price of goods as the vast majority of goods sold to the public are transported on the road.”
The commission also acknowledged that the budget was a “complex and difficult balancing act”, saying it was “fully aware” of the difficulties in limiting expenditure while collecting revenue through taxes and stimulating economic growth.
Going up
Gigaba had argued that the government was doing all it could to reduce the impact of the VAT hike on poor households, noting that the state was also boosting social grants payments and increasing the bottom three tax brackets.
He said plans to spend R57bn over three years on fee-free tertiary education for students with a family income below R350 000 per annum was another “important step forward in breaking the cycle of poverty and confronting youth unemployment”.
“Labour statistics show that unemployment is lowest for tertiary graduates,” he said.“Higher and further education and training is being made accessible to the children of workers and the poor.”
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