Increasing VAT should be implemented as 'a last resort' - Mkhize

CAPE TOWN - Chairperson of Parliament’s cooperative governance committee, Zweli Mkhize, said that increasing the rate of value-added tax (VAT) should only be implemented as "a last resort".

He said that a proposed two percentage point increase in VAT could exacerbate even further poor communities' ability to pay for municipal services.

A former minister of this portfolio, Mkhize told the media at Parliament on Monday that for as long as there continued to be dysfunctional municipalities, not enough was being done to fix the problems.

Following recent oversight visits to Free State municipalities, Mkhize said that the high levels of municipal debt, non-payment for services, operational dysfunction and political instability continued to have a negative impact on service delivery.

Not a single municipality in the Free State has been able to produce a clean audit, while six councils in the province are yet to produce any financial statements for the past year.

Mkhize said that the high cost of living was concerning, hence a budget proposal to increase the number of zero-rated food items. 

The Cabinet was due to meet again on Monday to address the budget shortfall ahead of its tabling next week. 

"Any increase in VAT will be really detrimental to the poor and it's something that has to be considered as a really, really last resort," Mkhize said.

But Mkhize said that the culture of non-payment for basic services extended to government departments too and they owed municipalities millions. 

"You cannot say the municipality doesn't have money to deliver services but the same departments are owing the municipality."

Mkhize said the portfolio committee would insist on a report back on the corrective actions being taken by municipalities to address issues highlighted in audits and investigative reports.