South Africa’s 2025 budget proposal faces scrutiny as lawmakers consider a contentious VAT increase. Finance Minister Enoch Godongwana’s earlier budget was rejected, placing pressure on the ANC to secure support. Lawmakers have until April 3 to vote on various budget stages, with consequences for failure to pass by April 1. The National Treasury plans to implement the VAT hike by May 1, independent of the budget’s status. The ANC is open to dialogue with other parties to ensure budget approval.
In the coming weeks, South Africa’s lawmakers will examine the proposed 2025 budget, amidst a controversial plan to increase the value-added tax (VAT). Finance Minister Enoch Godongwana presented a revised budget on March 12, which faced rejection from major parliamentary parties, despite a shift from a 2 percentage point to a 1 percentage point hike over two years. This unprecedented situation may lead to challenges in passing the budget before the fiscal year concludes on March 31.
The budget’s consideration will proceed through three stages. Initially, lawmakers will vote on the fiscal framework and revenue proposals, outlining economic policy, revenue expectations, and government spending limits. Subsequently, the division of revenue bill will be reviewed, detailing fund distribution among national, provincial, and local governments. Finally, the appropriation bill will allocate funding for specific departments, with each phase necessitating congressional approval before advancing.
Lawmakers have until April 3, 16 working days post-budget tabling, to approve the fiscal framework and revenue projections, with potential flexibility for delays. Amendments can be made to the budget, but they must adhere to the revenue and spending limits originally stated. If the budget does not receive approval by April 1, government spending may continue, limited to 45% of the previous fiscal year’s budget.
The National Treasury has communicated its ability to enact the VAT hike by May 1, regardless of whether the budget is passed. Should the VAT increase be instituted and then later rejected by parliament, any required tax law adjustments must occur within a year, and no repayment of the tax would be mandated.
This budget situation poses significant challenges for the African National Congress (ANC), especially following their loss of a parliamentary majority. ANC Secretary-General Fikile Mbalula indicated the party’s willingness to engage with various political parties to facilitate the budget’s passage. Minister Godongwana expressed readiness to consider legislative changes, emphasizing the intricate trade-offs required in these discussions.
In summary, South Africa is facing a critical juncture regarding its 2025 budget and a proposed VAT increase. The budget is subject to scrutiny from lawmakers, with an intricate three-stage voting process ahead. Failure to pass the budget by April 1 will permit temporary government spending based on the previous year’s budget. Meanwhile, the implementation of the VAT hike could proceed independently. The ANC is actively seeking collaboration with other parties to navigate these challenges effectively.
Original Source: www.tradingview.com
