South Africa’s National Treasury proposed a reduced VAT hike of 0.5 percentage points to ease coalition tensions. This contrasts with a previous 2-percentage-point proposal that faced opposition. The Democratic Alliance remains opposed, complicating parliamentary approval.
On Wednesday, South Africa’s National Treasury presented a revised budget that included a smaller proposed increase in value-added tax (VAT). This adjustment is aimed at alleviating tensions within the ruling coalition, though uncertainties linger regarding parliamentary support for the measure. Initially, the Treasury planned a 2-percentage-point VAT increase, but faced opposition from coalition partners, leading to a significant political deadlock not seen since apartheid’s conclusion.
The updated proposal suggests a VAT increase of 0.5 percentage points, raising the current level of 15% effective on May 1, along with an additional 0.5 percentage point increment scheduled for 2026. This gradual approach has not garnered unanimous support, as highlighted by John Steenhuisen, leader of the Democratic Alliance (DA), who reiterated his party’s opposition to the budget.
Minutes prior to the finance minister’s budget presentation, Steenhuisen stated on X, “The DA will not support the budget in its current form.” Despite this dissent, a spokesperson for President Cyril Ramaphosa expressed some optimism about resolving outstanding issues to secure the budget’s approval.
In summary, South Africa’s revised VAT proposal aims to mitigate internal coalition conflicts by suggesting a minimal increase. However, significant opposition remains, particularly from the DA, indicating potential challenges in securing parliamentary approval. The Treasury’s strategy reflects an attempt to navigate political divisions while addressing fiscal needs.
Original Source: www.tradingview.com
