South Africa Proposes Revised VAT Hike Amid Coalition Disagreements

South Africa’s National Treasury has proposed a smaller VAT increase of 0.5 percentage points in a revised budget to address coalition disputes. This follows previous resistance to a proposed 2-percentage-point hike. Despite the adjustments, opposition persists from the Democratic Alliance as the budget awaits parliamentary support.

On Wednesday, South Africa’s National Treasury announced a revised budget featuring a reduced value-added tax (VAT) increase intended to alleviate tensions within the ruling coalition. This comes after the initial proposal of a 2-percentage-point VAT hike met resistance from coalition partners, leading to an unprecedented deadlock in South Africa’s political history since apartheid.

The new proposal suggests an increase of 0.5 percentage points to the current VAT rate of 15%, effective May 1, with an additional increase of 0.5 percentage points proposed for 2026. Despite this adjustment, significant uncertainty lingers regarding parliamentary support for the budget.

Just prior to the finance minister’s address, John Steenhuisen, leader of the Democratic Alliance (the second-largest political party), reiterated their firm opposition to the budget in its current form, stating, “The DA will not support the budget in its current form.” Conversely, President Cyril Ramaphosa’s spokesperson expressed optimism earlier, indicating confidence that any unresolved issues could be addressed to facilitate the budget’s passage.

In conclusion, South Africa’s revised budget proposes a smaller VAT increase, signaling attempts to bridge divisions within the ruling coalition amidst ongoing political tensions. While the Democratic Alliance maintains its opposition, there is hope from the government that potential obstacles may still be resolved before a vote in parliament, which will determine the budget’s future.

Original Source: www.tradingview.com