AFRICA/SOUTH AFRICA - "The increase in VAT and the price of fuel will be felt mostly by poorer people" warn the Bishops

Thursday, 1 March 2018 economy   justice   bishops  

Johannesburg (Agenzia Fides) - "The increase in VAT will be felt mostly by poorer people" warns the Parliamentary Liaison Office of the SACBC (Southern African Catholic Bishops' Conference) in an analysis of the economic policy launched by the new President of South Africa, Cyril Ramaphosa. "It may be true that middle-class and wealthy individuals actually pay most VAT, but that is simply because they buy more stuff, and more expensive stuff. They can mostly cope with the extra percentage point", says the document sent to Agenzia Fides. "But people who have to choose between buying a cheap pair of children’s shoes and putting supper on the table will feel it deeply", it emphasizes.
The financial plan launched by the government raises VAT from 14 to 15% but provides for exemption for 19 basic food products. According to the Parliamentary Liaison Office, far more should be done to make VAT a less regressive tax by exempting more of the necessities that poor and struggling families buy, "inexpensive clothing, school supplies, and basic toiletries, for instance".
The Council of Ministers is however considering the possibility of extending the list of food products exempt from VAT in order to mitigate the effect on the poor of a percentage point increase in the tax rate.
"The poor will also end up feeling the increase in the fuel levy more than the rich will, as taxi fares go up and the cost of food rises due to increased transport costs", emphasizes the analysis. "And then there is the matter of the R85 billion that is to be saved by cutting government expenditure over the next three years. A good deal of this will flow from decreased allocations to provinces and municipalities for infrastructure projects. Which projects exactly will suffer we do not know, but clearly there will be negative knock-on effects for employment in industries like construction and transport, where many lower-earning workers are employed. And no doubt some projects aimed at improving living conditions, public transport links, electrification of informal settlements, and so on, will be shelved or postponed".
But there are reasons for hope. The huge budget hole left in the coffers of the State by President Jacob Zuma, forced to resign due to the repeated scandals of his Presidency, can be filled: "Just as Mr Zuma helped to dig the hole we are in by his irresponsible governance decisions, his indifference to fiscal and monetary realities, and his wholehearted association with a range of crooks and looters, so Mr Ramaphosa can make much progress out of the hole by doing just the opposite: appointing honest and competent ministers and heeding their advice; setting the example by running a tight executive ship; and seeing to it that the crooks and looters are exposed and sent to jail".
"The next few weeks and months will tell us if and how he intends to go about these tasks. In the meantime, at least we seem to have stopped digging", concludes the analysis. (L.M.) (Agenzia Fides, 1/3/2018)