South Africa’s lawmakers will review the 2025 budget, which includes a proposed VAT hike from the previously planned 2 points to 1 point over two years. The budget’s approval, critical for government spending, faces delays with lawmakers required to finalize stages by early April. The ANC seeks support for budget passage amidst a complex political landscape, while the National Treasury states the VAT could be enacted by May 1, regardless of the budget’s status.
In the upcoming weeks, South African lawmakers will evaluate the 2025 budget, which includes a controversial proposal for a value-added tax (VAT) increase. Finance Minister Enoch Godongwana’s recent budget, tabled on March 12, was largely rejected by major political parties despite scaling the VAT hike from 2 percentage points to 1 over two years. This rejection leaves uncertainty about passing the budget before the fiscal year’s deadline of March 31, a first in post-apartheid governance.
The budget review process involves three critical stages. Initially, lawmakers will vote on the fiscal framework and revenue proposals that dictate economic policy, revenue forecasts, and overall government spending limits. Following this, they will assess the division of revenue bill, detailing fund allocations among national, provincial, and local governments. Lastly, the appropriation bill will be considered to distribute funds to specific programs and departments, with each stage contingent on the previous one’s approval.
Lawmakers must finalize the fiscal framework and revenue proposals by April 3, which gives them 16 working days post-tabling for approval. However, amendments can be made, with the constraint that changes cannot exceed the outlined revenue or spending estimates. If the budget is not passed by April 1, the government can continue spending up to 45% of the prior year’s budget until a new budget is approved, though new allocations require legislative approval.
Despite pending approval, the National Treasury indicated that the VAT increase could take effect on May 1. Should budget passage be delayed, the VAT hike would remain in effect for 12 months, and any changes to tax law necessitated by parliament would not involve repayment of the current tax.
The ANC, led by Godongwana, faces a challenging political landscape as it seeks support to navigate the budget’s passage amidst a newly fractured coalition. ANC Secretary-General Fikile Mbalula emphasized the party’s willingness to dialogue with all political factions to facilitate budget approval while Godongwana remains receptive to legislative suggestions, albeit recognizing the associated trade-offs.
The South African budget, fraught with challenges, is under scrutiny as lawmakers attempt to navigate a proposed VAT hike. The deadline for budget approval looms, with significant implications for government spending and tax policy. While the ANC strives for coalition support to ensure the budget’s passage, the potential implementation of the VAT hike ahead of budget approval introduces additional complexity. Clear communication and compromise among political parties will be crucial in shaping the nation’s fiscal landscape moving forward.
Original Source: www.tradingview.com
