South Africa’s Finance Minister Enoch Godongwana revealed a revised budget that includes a phased VAT increase to 16%. This proposal met with significant opposition, particularly from the Democratic Alliance, which rejected it outright. While the budget aims to enhance infrastructure and public services, concerns about its impact on poverty and government stability remain prominent.
On Wednesday, South Africa’s Finance Minister Enoch Godongwana presented a revised budget that lowers an initially suggested value-added tax (VAT) increase. Nonetheless, this proposal faced significant backlash, especially from the Democratic Alliance (DA), a crucial party in the unity government. The new budget proposes a staggered VAT increase, ultimately raising the rate to 16% by the 2026/27 financial year, implemented in two phases.
The planned VAT hike includes a 0.5% increase for the 2025/26 fiscal year, followed by another 0.5% the subsequent year. Following the announcement, many parliamentarians expressed dissatisfaction, leading to boos from the audience, and the DA quickly dismissed the budget as inadequate. DA leader John Steenhuisen firmly stated, “We will continue to fight for economic growth and jobs.”
In response, Godongwana emphasized that while VAT impacts all citizens, it is vital for financing essential public services. He countered suggestions for increasing corporate or personal income taxes, warning that such moves could deter investment and hinder job generation. South Africa currently grapples with a challenging economic landscape, characterized by a growth rate of merely 0.6% in 2024, an unemployment rate exceeding 32%, and pervasive inequality, with approximately two-thirds of the populace living in poverty, as per World Bank assessments.
The proposed budget allocates over one trillion rands ($54.4 billion) over three years to enhance infrastructure, energy supply, and public services, while also increasing funding for tax authorities to recover outstanding revenues. Conversely, the DA expressed concerns that this fiscal plan would impoverish South Africans further and jeopardize the stability of the unity government. They have declared their intention to withhold support, raising uncertainty about the budget’s ability to attain the parliamentary majority required for approval.
In summary, South Africa’s recent budget proposal has ignited controversy due to a contentious VAT increase despite its phased approach. The opposition from the Democratic Alliance underscores the potential challenges the unity government may face in securing legislative support. With the country’s economic struggles, the implications of this budget warrant careful scrutiny as it aims to address pressing public needs while navigating political obstacles.
Original Source: newscentral.africa
