South Africa’s Finance Minister unveiled a revised budget reducing the planned VAT increase. The new VAT proposal is a staggered increase to 16% by 2026/27, facing strong opposition from the Democratic Alliance due to economic concerns. The budget aims to invest in infrastructure while addressing tax authority funding.
On Wednesday, South Africa’s Finance Minister, Enoch Godongwana, presented a revised budget that reduces a previously suggested increase in value-added tax (VAT). The budget proposes a staggered increase of one percentage point to 16% by the 2026/27 fiscal year, divided into two phases: an initial 0.5% hike in 2025/26 and another 0.5% increase in the following year.
Despite the smaller proposed hikes, the announcement was met with discontent, particularly from the Democratic Alliance (DA), a key party within the unity government. Several parliamentarians expressed their displeasure during the announcement, and DA leader John Steenhuisen immediately rejected the budget, asserting, “We will continue to fight for economic growth and jobs.”
Minister Godongwana defended the decision to increase VAT, arguing that imposing higher corporate or personal income tax would deter investment and job creation. He emphasized that while VAT impacts all citizens, it is a necessary approach for funding essential public services in the country.
South Africa, the continent’s most industrialized nation, is struggling with a low growth rate of 0.6% in 2024, high unemployment exceeding 32%, and pronounced inequality. According to World Bank estimates, approximately two-thirds of the population live in poverty, highlighting significant socio-economic challenges.
The budget proposes an allocation of over one trillion rands ($54.4 billion) over the next three years, aimed at enhancing infrastructure, energy supply, and public services. Additionally, it includes increased funding for tax authorities to address uncollected revenue losses. However, the DA cautioned that this plan may further impoverish South Africans while positioning the unity government in jeopardy.
In summary, South Africa’s revised budget introduces a staggered VAT increase amidst criticism and opposition from the Democratic Alliance. The proposed fiscal policies aim to fund crucial public services despite the challenges of slow economic growth, high unemployment, and widespread poverty. As the situation evolves, the budget’s acceptance in parliament remains uncertain, especially regarding potential support from vital political parties.
Original Source: newscentral.africa
