South Africa’s Finance Minister unveiled a revised budget featuring a staggered VAT increase, provoking strong opposition from the Democratic Alliance. The budget aims to raise VAT to 16% by 2026, amidst a sluggish economy with high unemployment and poverty rates. The DA warned the proposal would worsen financial conditions for citizens, potentially destabilizing the coalition government.
On Wednesday, South Africa’s Finance Minister, Enoch Godongwana, introduced a revised budget that features a scaled-back proposal for a value-added tax (VAT) increase. This adjustment faced significant backlash, particularly from the Democratic Alliance (DA), a prominent faction within the nation’s coalition government. The new plan proposes a staggered VAT increase, incrementing the rate by one percentage point to 16% by the 2026/27 financial year, divided into two phases: an initial 0.5% rise in 2025/26 and another 0.5% the following year.
The announcement elicited disapproval from several parliament members, with the DA promptly dismissing the budget. DA leader John Steenhuisen asserted, “We will continue to fight for economic growth and jobs.” In response, Godongwana defended the tax strategy, contending that raising corporate or personal income tax would impede investment and job creation. He maintained that, although the VAT will impact all citizens, it is crucial for funding essential public services.
South Africa’s economy, the most developed in Africa, is burdened by a meager growth rate of 0.6% in 2024 and an unemployment rate exceeding 32%. Additionally, approximately two-thirds of the population are living in poverty, as reported by World Bank estimates. The budget allocates over one trillion rands ($54.4 billion) over three years aimed at enhancing infrastructure, energy supply, and public services, alongside increased funding for tax authorities to recover substantial amounts of uncollected revenue.
Despite these allocations, the DA cautioned that the overall budget strategy would exacerbate financial challenges for South Africans, potentially endangering the unity government. The party has expressed its intention to deny support, raising concerns regarding the budget’s ability to attain the parliamentary majority essential for approval.
In summary, South Africa’s latest budget proposal has ignited considerable dissent, particularly from the Democratic Alliance, over its VAT increase plan. As the economy struggles with low growth and high unemployment, Minister Godongwana’s defense of the budget highlights the tensions between necessary revenue generation and public discontent. The DA’s commitment to opposing this budget could jeopardize its passage, emphasizing the precarious nature of the government’s coalition.
Original Source: newscentral.africa
