South Africa Proposes Reduced VAT Increase in Revised Budget…

South Africa’s National Treasury proposes a smaller VAT increase to address coalition tensions, suggesting a 0.5% raise effective May 1 and another in 2026. Opposition from the Democratic Alliance persists, complicating parliamentary approval despite signals of potential resolution from the President’s office.

On Wednesday, South Africa’s National Treasury proposed a reduced increase in value-added tax (VAT) within a revised budget, intended to ease tensions within the ruling coalition. Previously, a 2-percentage-point increase was suggested, but this faced opposition from the African National Congress’ coalition partners, resulting in a legislative deadlock unprecedented since apartheid ended.

In the updated proposal, the Treasury aims to increase VAT by 0.5 percentage points from the current rate of 15%, effective May 1, with an additional 0.5-percentage-point rise planned for 2026. Just before the finance minister’s announcement, John Steenhuisen, leader of the Democratic Alliance—South Africa’s second-largest political party—expressed ongoing resistance to the budget.

Steenhuisen stated, “The DA will not support the budget in its current form,” voicing the party’s intention to oppose the proposed adjustments. Nevertheless, President Cyril Ramaphosa’s spokesperson expressed optimism earlier on Wednesday, indicating a belief that remaining concerns could be addressed to facilitate the budget’s approval.

In summary, South Africa’s National Treasury has suggested a more modest VAT increase to bridge coalition divides, although there remains significant opposition, particularly from the Democratic Alliance. The outcome in parliamentary approval remains uncertain, despite attempts from the Treasury and the President’s office to resolve outstanding issues.

Original Source: www.tradingview.com