Hiking VAT rate won't increase revenue but worsen tax fraud, says ActionSA

CAPE TOWN – ActionSA believes increasing the value-added tax (VAT) rate will not increase revenue - rather only exacerbate tax fraud. 

Cabinet met again on Monday to try to break the deadlock on upping the VAT rate to 17% – before the finance minister is due to present a revised budget to Parliament next week. 

ActionSA leader Herman Mashaba says increasing the VAT rate will make it more lucrative for foreign nationals to open businesses in South Africa. 

The party says the government must start by cutting the fat in the executive if it wants to find more money to spend on frontline services. 

ALSO READ: Govt should cut the fat rather than hike VAT - ActionSA

Mashaba doesn’t believe increasing VAT will have the desired outcome of raising revenue. 

“It’s not going to come to our fiscus. It’s actually going to invite more criminal activity because we are giving them an extra two percentage point incentive to come, and do their criminality in South Africa.” 

Parliamentary leader Athol Trollip says it’s well-known the VAT system is an easy way to defraud the revenue service. 

“If you’ve got half the businesses in this country run by illegal immigrants, who are not even registered, it creates an enormous tax hole. So you think you are increasing tax to collect more revenue, but you are actually not collecting anymore revenue.”

The party says if ministers’ travel wings were clipped - as well as their perks and security - millions can be found to plug the budget deficit.