As South Africa’s lawmakers prepare to examine the 2025 budget, they face key decisions regarding a proposed VAT increase. The budget was recently tabled by Finance Minister Enoch Godongwana but rejected by major parties. Lawmakers will assess the budget in three stages, with an April 3 deadline for the fiscal framework. Failure to pass the budget by April 1 enables the government to use last year’s budget, while planned VAT hikes may begin even without an approved budget.
South Africa’s lawmakers will soon review the 2025 budget, which may face revisions as they deliberate on a proposed increase in value-added tax (VAT). Finance Minister Enoch Godongwana introduced a revised budget on March 12, which was largely rejected by major political parties despite reducing the VAT hike from two percentage points to one over two years. This situation marks a significant impasse, as it may be the first time a budget is not passed before the fiscal year concludes on March 31 in the post-apartheid era.
The budget deliberation will unfold in three stages. Initially, lawmakers will vote on the fiscal framework and revenue proposals, which outline economic and spending limits. The second stage involves considering the division of revenue bill, detailing fund allocation among national, provincial, and local governments. Lastly, the appropriation bill will assign money directly to government departments. Each of these bills must gain approval sequentially, with a deadline for the fiscal framework set for April 3, though there remains a possibility for delays.
In the event the budget is not approved by April 1, the start of the new fiscal year, the law allows the government to continue operating on 45% of the prior year’s budget until a new budget is sanctioned. However, no new allocations can be enacted without parliament’s consent.
The National Treasury indicated that the VAT increase could still be enacted as early as May 1, regardless of the budget’s parliamentary status. Should the parliament choose to repeal the VAT hike afterward, necessary adjustments to tax legislation would need to occur within a year, with no requirement for tax repayment during that time.
The proposed budget signifies a crucial challenge for the African National Congress (ANC), which has recently lost its majority in parliament. ANC Secretary-General Fikile Mbalula expressed the party’s willingness to engage with all political entities to reach a consensus on the budget. Minister Godongwana remains open to suggestions concerning budget modifications, advising lawmakers to consider the complex trade-offs involved in budgetary shifts.
The upcoming discussions regarding South Africa’s budget present significant challenges, particularly surrounding the contentious VAT hike. Given the importance of gaining support for the budget, the ANC’s negotiations with other political parties will be critical. The urgency of the timeline, along with the provisions for governance should the budget fail to pass, further illustrate the complexities of South Africa’s financial planning in a politically fragmented environment.
Original Source: money.usnews.com
