The Congress of South African Trade Unions (COSATU) has once again criticized the proposed 0.5% VAT increase, along with an additional 0.5% hike potentially taking place next year. The union has reiterated its call for higher taxes on the wealthy and corporations instead.
Finance Minister Enoch Godongwana has pushed back against the idea of increasing corporate tax, arguing that such a move would be counterproductive, as it could negatively impact the economy and drive up unemployment.
However, COSATU’s parliamentary coordinator, Matthew Parks, contends that the finance minister’s stance is contradictory, particularly when considering the disproportionate burden a VAT increase would place on the general public—especially the socially vulnerable.
“Increasing VAT and squeezing those who are already struggling won’t help either. It won’t benefit the economy because when people have less money to spend, demand for goods declines, ultimately removing money from circulation. It also unfairly punishes the victims of the economic crisis, making their lives even more difficult,” Parks argued.
The impact on the poor and working class has sparked debate over whether the budget is truly “pro-poor.” Critics, including the Democratic Alliance (DA), have dismissed the budget speech as failing to prioritize the most vulnerable—an assertion that Minister Godongwana has strongly refuted.
Parks views the budget as a mixed bag for the poor, acknowledging that while certain measures offer relief, others pose significant challenges.
“There are positive aspects, such as maintaining the fuel price levy, which benefits commuters and helps cushion food costs. Expanding the VAT-exempt basket to include additional meat and dairy products is also a welcome move,” he said.
However, Parks contrasted these positives with what he sees as harmful decisions, particularly the VAT increase and the failure to adjust the Social Relief of Distress (SRD) grant in line with inflation.
“We are disappointed that the SRD grant was not adjusted for inflation—it would have required only R1.5 billion. While there are positive aspects in government spending, funding them through a VAT hike is unacceptable. It simply makes no sense,” he stressed.
