Revised South African Budget Faces Backlash Over Tax Increases

South Africa’s Finance Minister introduced a revised budget proposing a 1% VAT increase, which was met with protests and opposition from the Democratic Alliance. The budget allocates over R1 trillion for infrastructure improvements while facing criticism over tax increases amidst high unemployment rates and economic challenges.

On Wednesday, South African Finance Minister Enoch Godongwana presented a revised budget that included a smaller increase in the value-added tax (VAT) than originally proposed. While the VAT hike was scaled down to 1 percentage point, bringing it to 16% by the 2026/27 financial year, it was met with immediate disapproval from the Democratic Alliance party, a significant member of the national unity government. The proposed increase will occur in two phases, with a 0.5 percentage point increase for the 2025/26 period and another for the subsequent financial year.

During the presentation, Godongwana faced vocal criticism from several parliamentarians, leading to a negative reception. The Democratic Alliance, led by John Steenhuisen, promptly rejected the budget, asserting its aim to promote economic growth and job creation. Additionally, Godongwana indicated that the government would not consider inflation-linked increases to personal income tax brackets, citing a current inflation rate of 3.2% as a concern.

Despite being the continent’s most industrialized nation, South Africa grapples with a sluggish economy characterized by a staggering unemployment rate exceeding 32%, particularly impacting the youth. With about two-thirds of the population living in poverty, as reported by the World Bank, the country continues to contend with the socioeconomic legacies of its past.

The budget details over R1 trillion (approximately NZ$95.1 billion) earmarked for crucial infrastructure improvements, encompassing transport networks, energy systems, and water and sanitation projects over three years. The tax service will receive additional funding to enhance revenue collection, addressing the issue of uncollected taxes amounting to billions of rands.

The Democratic Alliance criticized the budget, claiming it would worsen the financial situation for South Africans and jeopardize the government’s future. The party expressed dissatisfaction with the ANC’s proposed tax increases, signifying their intention to withhold support for the budget in parliament.

The South African government’s revised budget faces significant opposition despite a reduced VAT increase. With a backdrop of high unemployment and economic challenges, the Finance Minister’s proposals stress the urgent need for infrastructure improvements funded through careful tax management. As political criticism mounts, the implications for future economic stability remain uncertain.

Original Source: www.nzherald.co.nz