South Africa’s finance ministry has decided not to increase VAT from 15% as planned due to political opposition. This decision will result in a significant revenue shortfall of approximately 75 billion rand over the medium term. Finance Minister Enoch Godongwana is set to introduce revised budget proposals soon, while tensions between major political parties continue regarding taxation matters.
The South African finance ministry has announced the repeal of its planned increase in value-added tax (VAT), which was set to take effect on May 1. Initially, the National Treasury intended to raise VAT by 1 percentage point over two years; however, significant opposition from various political parties led to this decision. Consequently, VAT will remain at 15%, according to the ministry’s statement.
Finance Minister Enoch Godongwana is expected to present a revised Appropriation Bill and Division of Revenue Bill in the coming weeks. Despite this decision, the ministry anticipates that estimated revenue will decrease by approximately 75 billion rand (equivalent to $4.02 billion) over the medium term. The ministry has indicated that Parliament will need to adjust expenditures to prevent any adverse effects on South Africa’s fiscal sustainability.
Tensions between the two largest parties in the coalition government, namely the African National Congress and the Democratic Alliance, have been highlighted due to differing stances on the proposed VAT increase. Furthermore, the legality of the VAT hike was contested in court, intensifying the debate surrounding this issue.
In summary, South Africa will not proceed with the planned VAT increase originally scheduled for May 1, maintaining the rate at 15%. This decision stems from significant political opposition and the necessity to safeguard fiscal sustainability, despite anticipated revenue shortfalls. The upcoming legislative adjustments aim to address these financial challenges while fostering political consensus.
Original Source: www.tradingview.com
