Press Release – PMC’s Official Response to the Fiasco on the Budget and Proposed VAT
Increase

The People’s Movement for Change (PMC) has a firm view on the proposed increase inValue-Added Tax (VAT) or any tax that will further burden the poor, as it will disproportionately impact the majority of South Africans – especially lower- and middle income households – who are already struggling under severe economic pressures. The timing of this increase, amidst rising inflation, staggering unemployment, and failing infrastructure, demonstrates a disregard for the everyday struggles of ordinary citizens andagovernment out of touch with the daily realities and struggles poor people face. 

The fact the Government was even considering a VAT increase is mind blowing as, VAT, bynature, is a regressive tax. Unlike income tax, which scales with earnings, VAT applies equally to all consumers, meaning lower-income individuals bear a heavier financial burdenin proportion to their income. While the government argues that certain essential goods areVAT-exempt, the reality is that the current exemption basket does not extend far enoughtocover the full range of necessities consumed by low-income households. This means that those who can least afford it will still face rising costs on many of their daily essentials. 

Furthermore, increasing VAT will likely drive up inflation, further compounding financial hardships for already struggling households. This policy risks deepening poverty, increasingunemployment, and exacerbating inequality in an already fragile socio-economic environment. 

The Flawed Justification for a VAT Increase 

PMC rejects the notion that a VAT increased was necessary to fund social relief programs such as the Social Relief of Distress (SRD) grant. It is fundamentally unjust to finance social support by extracting more from the very people such programs are meant to assist. Takingmoney from struggling households to redistribute in the form of grants only perpetuates acycle of economic hardship rather than alleviating it. 

Rather than resorting to regressive taxation, the government should prioritize: 

 Cutting Wasteful Expenditure: Billions of Rands are lost annually due to inefficiencies, corruption, and mismanagement. Fiscal discipline must be enforcedbefore turning to tax increases. 

 Supporting Small Businesses and Entrepreneurs: Small, medium, and microenterprises (SMMEs) are the backbone of job creation in South Africa. Burdeningthem with further financial pressures hinders economic growth and employment opportunities. Instead of higher consumption taxes, policies should focus on fosteringa thriving business environment.

 Encouraging Sustainable Economic Growth: A strong working population naturally increases tax revenue without placing an undue burden on consumers. Investment in infrastructure, job creation, and entrepreneurship should be the government’s priority over short-term tax hikes. 

 Capacitating Municipalities to ensure effective Service delivery that impact thedaily lives of ordinary people. 

A Call for an Inclusive Economic Strategy 

PMC has consistently advocated for a long-term, inclusive economic plan that fosters sustainable development. We urge the government to adopt alternative funding mechanismsthat do not disproportionately impact the poor and working class. This includes exploringrevenue strategies that do not stifle economic growth or hinder SMME development. 

We stand with the people of South Africa in demanding a fair and just economic system, onethat strengthens families, empowers communities, and creates opportunities for all. We will continue to fight against unfair taxation and advocate for policies that put the needs of citizens first. 

Let’s work together for a more equitable futu

Marius Fransman
People’s Movement for Change
President