The South African Youth Economic Council (Sayec) expressed deep disappointment and grave concern over the National Treasury’s inability to table the Budget in Parliament and the proposed 2% VAT hike - a move it referred to as "inherently regressive".
In a statement issued on Thursday, the Council said Finance Minister Enoch Godongwana's failure to deliver the Budget Speech in Parliament on Wednesday was a “historic first in our democratic era that jeopardises the very foundations of our state".
Godongwana failed to deliver the Budget Speech, with the Speaker of Parliament, Thoko Didiza, saying the session could not proceed as the Executive asked for a postponement after the Government of National Unity (GNU) could not agree on the 2% VAT hike.
“In a healthy democracy, the executive must function as a unified whole; the state, in its entirety, is far greater than the sum of its political factions. Party politics must not fragment or undermine the essential operation of a functional state, for it is only through a cohesive GNU that we can preserve and build upon the legacy of the first GNU in South Africa.
“While the need for additional revenue to fund critical public services is undeniable, a uniform VAT increase is inherently regressive. It disproportionately burdens lower-income households — those who spend a higher share of their income on essential goods — by forcing them to pay more for items they cannot easily do without.”
The Council stated that the impact of this tax increase will be felt more acutely by young people, citing unaffordable food prices as one of the immediate challenges they battle with.
Instead of taxing low-income people, Sayec suggested the National Treasury urgently optimise progressive tax mechanisms like capital gains, dividends, and estate duty taxes. These taxes focus on wealth accumulation, ensuring that those who have benefited the most from the economy contribute a fair share.
“While it is crucial to strike a delicate balance to avoid discouraging investment in private capital and wealth-generating assets, our state can no longer rely on a constrained revenue base through VAT while overlooking the significant revenue potential from wealth-based taxes.
“The failure to present the budget, combined with the threat of a VAT hike, highlights a dual crisis: one of slightly fractured governance and another of economically regressive policy threatening social equity. We call upon all stakeholders to address these issues because failure to do so effectively undermines young people’s livelihoods,” said Sayec.
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