Online Reporter
South Africa’s finance ministry has announced it has abandoned plans to increase value-added tax (VAT) from 15 percent to 16 percent starting May 1.
The proposal, which aimed to raise VAT by 1 percentage point over two years as part of the 2025 national budget, faced significant opposition from political parties, particularly the African National Congress (ANC) and the Democratic Alliance (DA), raising concerns about the stability of the coalition government.
The decision came after the DA challenged the tax hike in court and voted against the budget’s fiscal framework, citing mistrust within the coalition.
The ministry stated that the decision followed extensive consultations with political parties and careful consideration of parliamentary recommendations.
Without the VAT increase, estimated revenue is projected to fall short by around 75 billion rand (approximately $4,02 billion) over the medium term.
The finance ministry indicated that it would seek parliamentary adjustments to ensure fiscal sustainability despite the revenue shortfall.
Finance Minister Enoch Godongwana had previously warned that not raising VAT could severely harm state finances. – Reuters
