OPINION: Runaway spending, not VAT, is the real budget problem.
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GUEST - Ann Bernstein is executive director of the Centre for Development and Enterprise.
To break the deadlock over the budget, the National Treasury has reportedly proposed a smaller VAT increase instead of the initially planned hike of two percentage points. However, this “compromise” does not deal with SA’s fiscal crisis and wastes the opportunity provided by the budget debacle.
The real budget issue is not VAT — it is the government’s inability to control spending and use tax revenue efficiently. We sit today with a R190bn hole in the three-year medium-term expenditure framework (MTEF) precisely because of reckless economic policy resulting in a country in deeper and deeper debt.
To break the deadlock over the budget, the National Treasury has reportedly proposed a smaller VAT increase instead of the initially planned hike of two percentage points. However, this “compromise” does not deal with SA’s fiscal crisis and wastes the opportunity provided by the budget debacle.
The real budget issue is not VAT — it is the government’s inability to control spending and use tax revenue efficiently. We sit today with a R190bn hole in the three-year medium-term expenditure framework (MTEF) precisely because of reckless economic policy resulting in a country in deeper and deeper debt.