South Africa’s Treasury proposed a smaller VAT hike in its revised budget, increasing it by 0.5 percentage points. This decision seeks to alleviate coalition tensions after a previous 2-point hike was rejected. Despite attempts to reach consensus, the Democratic Alliance remains opposed, casting uncertainty over the budget’s approval in parliament.
On Wednesday, South Africa’s National Treasury submitted a revised budget proposing a smaller value-added tax (VAT) increase to mitigate tensions within the ruling coalition. Initially, a 2-percentage-point VAT increase was proposed, but coalition partners of the African National Congress opposed this significant hike, leading to a notable impasse.
The revised proposal suggests a 0.5-percentage-point increase in VAT from the current rate of 15% starting on May 1, 2024, followed by an additional increase of 0.5 percentage points planned for 2026. This compromise aims to gain broader support within the coalition.
However, opposition remains, as Democratic Alliance leader John Steenhuisen declared his party’s refusal to support the budget in its present form. Just before the finance minister’s announcement, Steenhuisen confirmed this stance via social media platform X. Earlier in the day, President Cyril Ramaphosa’s spokesperson expressed optimism regarding the resolution of outstanding issues to ensure the budget’s passage.
In summary, the South African Treasury’s revised proposal aims to address coalition disagreements through a more modest VAT increase. While this adjustment may foster a resolution within the ruling party, opposition from key political figures indicates that challenges persist. The successful passage of the budget will depend on navigating these political complexities.
Original Source: www.tradingview.com
