MALAIKA MAHLATSI: A gendered analysis is absent in the VAT debate

On the 19^th of February 2025, the Minister of Finance, Enoch Godongwana, was meant to table the 2025 Budget Speech at the national assembly in Cape Town. The tabling of the Budget follows the State of the Nation Address (SONA), which President Cyril Ramaphosa delivered on the 6^th of February 2025. During the Budget Speech, the finance minister must communicate the allocation of financial resources to the national government’s priorities outlined in the SONA. He provides a detailed plan for 2025 spending, including proposals for revenue collection to help fund the government’s planned interventions and commitments.

In an unprecedented development, the tabling of the budget was postponed (to the 12^th of March 2025), with the finance ministry positing in a media statement that a postponement was needed to allow for further deliberations. This was after members of cabinet expressed fundamental differences on the proposed increase in taxes, specifically value-added tax (VAT) and personal income tax.

In a leaked 2025 tax summary document for the South African Revenue Service (SARS), Godongwana had proposed a two-percentage point increase of VAT – from 15 to 17 percent. While adjustments to the zero-rated tax basket were to be made, political parties, including those who form part of the Government of National Unity (GNU) and the broader society took exception, contending that South Africans were already overly taxed, and that an increase in VAT would worsen the already crippling cost-of-living crisis that the country is faced with.

Politicians, business leaders, analysts, academics and ordinary South Africans have opined extensively on the perils of increasing VAT and personal income tax. The most general consensus is that VAT is a regressive instrument that places a disproportionate burden on lower-income households.

Providing an illustration of this, Liezil Cerf, a director at the Government Communication and Information System (GCIS) made this profound analysis: “When a low-income family earning R240, 000 annually spends R60,000 on necessities, the current 15% VAT already takes R9,000 (3.75% of their income). With the proposed 2% increase, their VAT burden would rise to R10,200 – a R1,200 increase that represents 0.5% of their total income.

"Meanwhile, for a higher-income household earning R2.4million, that same R1200 increase represents just 0.05% of their income”. Cerf was making the point that even with zero-rated basis items considered, VAT increases disproportionately impact the poorest South Africans. She proposed that the government needs to consider alternative revenue sources that don’t disproportionately affect the most vulnerable in our society.

"Some of these alternative revenue sources have been explored by various economists and analysts. In a document titled “Policy Recommendations: Increasing South Africa’s Government Revenue Without Raising VAT”, prepared for the finance minister, strategic recommendations are explored.

These include the expansion of the tax base through the strengthening of compliance by increasing SARS’s capacity to detect and alleviate tax evasion, closing loopholes and enforcing stricter regulations on corporate tax avoidance, and the formalisation of informal businesses by offering incentives for registration and compliance. Other recommendations are included, all of which provide alternatives to increasing VAT, arguing, correctly, that the poor will be most affected by it.

While the pro-poor analysis that has been made is profoundly important, there is a need to employ a gendered analysis of the impact of VAT due to gender segmentation in the South African labour market and the specific impact of inequalities in South Africa. Three important facts must be considered. Firstly, unemployment disproportionately affects women.

According to the Quarterly Labour Force Survey in quarter 3 of 2024, the trends in labour force participation and absorption rates for men and women from 2014 to 2024 indicate that fewer women have been participating in the labour market compared to men.

Secondly, the gender pay-gap is not only persistent, but it is rising. The gender pay gap in South Africa is currently 20.1 percent at the hourly level and 32.5 percent at the monthly level. According to a study conducted on the SA-TIED Programme, in 2021, women earned 78 cents for every rand earned by men, compared to 89 cents in 2008. Median-male salaries have been increasing faster than those for women.

Thirdly, women continue to bear the brunt of parenting, both in terms of being single parents and concerning the motherhood penalty (the negative impact that having children can have on a woman's career advancement and earnings, often resulting in disparities between women with children and their counterparts without children, and even compared to men in similar roles). A study by the Human Sciences Research Council (HSRC) estimated that 60 percent of South African children have an absent father, and that over 40 percent of mothers are single parents. The numbers are especially high for Black women.

The implications of this are layered. Not only are women disproportionately affected by unemployment, but those who do work are confronted with unequal pay. Coupled with the disproportionate burden of household and childcare duties that often falls on women, further impacting their career progression, this means that an increase in VAT is especially impactful for women who are already financially disenfranchised even when they are employed.

And as a significant number of women are single parents, and Black women in particular bear the brunt of Black tax as evidenced in research by Jasmine Hill published by The Gender Policy Report, and a Masters thesis by Banzi Diko titled “Experiences of Black tax on professional women in South Africa”, the burden of a VAT increase further compounds their precarious financial situation.

The debate about the impact of a VAT increase is not only about the poor, it is about the continued disenfranchisement of women, particularly Black women. That this is not at the centre of the VAT increase discourse demonstrates how gender justice is being paid lip service by some of our legislators.

Women in our country already deal with many challenges arising from sexism and classism. For Black women, this is compounded by racism and existing in a society that is intent on their erasure. Economic growth and development are very important.

However, there is no tool for development more effective than the empowerment of women.