South Africa’s Budget Sparks Outrage Despite Reduced VAT Proposals

South Africa’s Finance Minister Enoch Godongwana presented a revised budget featuring a staggered VAT increase to 16% by 2026/27. The announcement met with strong opposition, especially from the Democratic Alliance, which threatened to withhold support for the budget. Despite the government’s emphasis on the necessity of VAT for public service funding, concerns persist regarding its impact on poverty and economic growth.

On Wednesday, South Africa’s Finance Minister Enoch Godongwana presented a revised budget, which included a reduction in a previously proposed value-added tax (VAT) increase. Despite this amendment, the plan faced significant backlash, especially from the Democratic Alliance (DA), a central party in the nation’s unity government. The revised strategy proposes a gradual VAT increase from 15% to 16% by the 2026/27 financial year, structured in two phases: an initial rise of 0.5% in 2025/26 followed by another 0.5% in the subsequent year.

The announcement prompted negative reactions, with several parliamentarians expressing their discontent through boos. John Steenhuisen, the DA leader, swiftly denounced the budget, stating, “We will continue to fight for economic growth and jobs.” In response, Godongwana defended the tax strategy, claiming that raising corporate or personal income taxes would negatively impact investment and job creation. He emphasized that while VAT affects all citizens, it is essential for financing public services vital to the nation’s welfare.

In light of these developments, South Africa’s economy, recognized as the most industrialized on the continent, continues to struggle with a mere 0.6% growth rate projected for 2024 and an unemployment rate exceeding 32%. According to the World Bank, approximately two-thirds of South Africans live under the poverty line. The budget outlines an allocation of over one trillion rands ($54.4 billion) aimed at enhancing infrastructure, energy resources, and public service financing, alongside boosting tax authority funding to recover substantial uncollected revenue.

Despite these initiatives, the DA cautioned that the new budget could exacerbate poverty and jeopardize the unity government. The party indicated its intention to withhold support, raising concerns about the budget’s ability to secure the parliamentary majority required for approval.

In summary, South Africa’s revised budget has elicited significant controversy despite the diminished VAT increase. The approach to implement a staggered VAT rise reflects the government’s efforts to fund essential services amid ongoing economic challenges, including stagnation and high unemployment rates. However, opposition from key political figures highlights apprehension regarding the potential impacts of these fiscal policies on the populace’s welfare.

Original Source: newscentral.africa