South Africa’s 2025 budget is under scrutiny as lawmakers discuss a VAT increase proposed by Finance Minister Enoch Godongwana. The budget review consists of three stages, with a deadline of April 3. If the budget is not passed by April 1, previous year spending limits will apply. The National Treasury has indicated a possible VAT hike implementation by May 1, posing significant challenges for the ANC’s majority status.
As South Africa prepares to review its 2025 budget, political parties confront a controversial proposal to increase value-added tax (VAT). Lawmakers will evaluate this budget in the coming weeks, as Finance Minister Enoch Godongwana faces significant opposition despite reducing the intended VAT hike from two percentage points to one point over two years. The current fiscal year ends on March 31, and a budget approval before then appears uncertain.
The review process involves three distinct stages. Initially, lawmakers will vote on the fiscal framework, which includes economic policy and revenue projections. This is followed by the division of revenue bill, detailing budget allocations among national, provincial, and local governments. Lastly, the appropriation bill will specify funding for individual departments. Each phase requires individual approvals and must be completed by April 3, allowing for limited flexibility.
Should the budget not be passed by April 1, the government may continue expenditures up to 45% of the previous year’s budget until the new budget is approved. However, without parliamentary consent, no new spending allocations can be made.
The National Treasury has indicated that implementation of the VAT hike is feasible by May 1, even if parliamentary approval remains pending. The effective date will be determined by the Minister, and if parliament later revokes the VAT increase, necessary tax law adjustments must occur within 12 months without requiring repayment of the tax collected.
The budget proposal poses a formidable challenge for the African National Congress (ANC), which has lost its majority. ANC Secretary-General Fikile Mbalula emphasized the party’s willingness to negotiate with other political factions to facilitate budget approval. Godongwana has also expressed openness to budget amendments, emphasizing the importance of understanding complex trade-offs involved in these discussions.
In summary, South Africa’s upcoming budget discussions are set against a backdrop of political contention regarding the proposed VAT hike. The process involves critical legislative stages, each with specific deadlines, and if the budget fails to pass, existing fiscal provisions will temporarily sustain government operations. Furthermore, the National Treasury’s potential early implementation of the VAT adjustment raises questions about legislative authority and fiscal management for the coming year. The ANC’s need for bipartisan support will be crucial to navigating this legislative process successfully.
Original Source: money.usnews.com
