'A painful blow' to millions

TAX: COSATU 'CAN'T SUPPORT HIKES AFFECTING POOR'

- Brian Sokutu

Despite Finance Minister Enoch Godongwana having yielded to pressure by tabling a reduced 0.5% value-added tax (VAT) hike during his budget speech yesterday, labour federation Cosatu expressed "extreme disappointment".

Cosatu said this marked "a painful blow" to millions of highly indebted working-class families.

In an unprecedented move since the dawn of democracy, the budget was last month postponed due to the ANC and DA disagreeing over the initially proposed two percentage point VAT increase, causing the rand and government bonds to fall.

Godongwana said National Treasury "examined alternatives to raising the VAT-having weighed up the policy trade-offs involved, including increases to corporate and personal income taxes".

"To raise the revenue needed, the government proposes to increase the VAT rate by half a percentage point in 2025-26 and by another half a percentage point in the following year. This will bring the VAT rate to 16% in 2026-27.

"Government also proposes no inflationary adjustments to personal income tax brackets, rebates and medical tax credits.

"These measures will raise R28 billion in additional revenue in 2025-26 and R14.5 billion in 2026-27.