SACP rejects proposed VAT hike, urges tax system overhaul

Source: @SACP/X.com. The new General Secretary of the South African Communist Party, Comrade Solly Mapaila, as elected by the SACP 15th National Congress.

Their support was confirmed at the party’s Political Bureau meeting over the weekend, amid public outrage over proposed tax hikes, including a significant VAT increase, which contributed to the unprecedented delay of the Budget Speech.

The party said alternatives to a VAT increase should include stricter capital regulation, tackling illicit financial flows, and addressing tax avoidance by multinationals and offshore-listed firms. Progressive taxes, such as a capital transactions tax and wealth tax, should be implemented.

Proposed tax reform solutions

Kieswetter recently highlighted that the 2018 VAT increase did not significantly boost revenue, suggesting that enhancing SARS's capacity would improve tax compliance and broaden the tax base. He noted that the uncollected taxes include approximately R450bn identified through theoretical modeling and over R300bn from outstanding tax returns.

In a statement, the SACP noted that corporate income tax rates have been drastically slashed since 1994, leading to a sharp decline in their contribution to national tax revenue, far outweighed by the disproportionate contributions of VAT and personal income tax. "As part of a comprehensive fiscal overhaul, the most recent 1% reduction in corporate income tax should be reversed to restore much-needed resources to the national fiscus," it said.

To this end, a KPMG report shows that South Africa's corporate income tax (CIT) rate has decreased from approximately 50% in the early 1990s to 27% in 2022. The most recent reduction, from 28% to 27% in 2022, was implemented to enhance the country's competitiveness and attract investment.

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Call for corporate tax reversal

Due to the proposed VAT increase, the SACP Political Bureau has called for an urgent consultative process within the Alliance and tasked the Party’s Secretariat with taking immediate leadership in implementing this initiative. (The Party had already rejected the budget on Monday, 17 February 2025 – two days before its scheduled presentation.)

"The SACP categorically opposes the adoption of regressive taxation measures, such as a VAT hike, and the defunding of key pro-poor programmes. A VAT increase, much like cutting funding for essential social services, will only serve to further impoverish the working class and marginalised communities, while shielding the rich and their wealth. This is not merely unfair – it is a direct attack on social equity and justice," it said.

The SACP reiterated its demand for a national budget that prioritises the implementation of the National Health Insurance (NHI) and facilitates a transition to a universal basic income grant for all South Africans.

Furthermore, the SACP urges the government to urgently recapitalise and revitalise state-owned enterprises, reversing the harm caused by neoliberal policies. "We call for reversing the damage to governance and management due to state capture, and stress that the delayed funding of these enterprises should not be viewed as 'bailouts'," it said.