South Africa’s finance minister blames former president for VAT hike

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Gaye Davis

Finance Minister Tito Mboweni has singled out former President Jacob Zuma’s sudden introduction of fee-free higher education as one of the main reasons for the decision to increase Value Added Tax (VAT).

Zuma made the announcement just ahead of the African National Congress (ANC)’s elective conference in December last year.

Mboweni was replying to debate on a tax bill that gives effect to the rise from 14 to 15% in VAT which kicked in earlier this year.

The ANC was forced to back the bill in the face of stinging criticism from opposition parties.

They blamed the ruling party for mismanaging the economy and for allowing state capture to siphon billions from the fiscus, while the South African Revenue Service suffered under the leadership of former commissioner Tom Moyane.

Mboweni gave MPs a basic economics lesson: if you want to spend on big-ticket items, you need the money to pay for them.

“There have been some major adjustments to the expenditure side of the budget which need to be financed – in particular, the free higher education. So, when you introduce such a large expenditure item, you have to find the revenue to fund that.

“If you don’t understand that inter-relationship, then we’re in a difficult conversation, where you might argue that you want less taxation, but you want higher expenditure. The two don’t go together.”

Having to find the money to fund fee-free higher education came as the economy remained mired in low growth and government debt ballooned, along with increasing demands on the public purse.

A seemingly subdued Mboweni – absent recently from question-time and some key debates – told the House the VAT hike’s effectiveness would be reviewed in three years’ time, with a report-back due by June 2021.

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