South Africa’s 2025 budget faces scrutiny from lawmakers with a potential VAT hike under discussion. The Finance Minister’s proposal received significant opposition, and if not passed before April 1, existing budgetary limitations apply. The ANC must navigate a coalition landscape for passage, while the VAT increase may still proceed unilaterally by the Treasury.
In South Africa, lawmakers are preparing to assess the 2025 budget, with the potential for amendments as political parties deliberate a proposed increase in value-added tax (VAT). Finance Minister Enoch Godongwana introduced a revised budget on March 12, which met with opposition from major parties, despite a reduction in the VAT hike from 2% to 1%, to be implemented over two years. This situation may result in the budget not passing before the fiscal year concludes on March 31, a scenario unprecedented since the end of apartheid.
The budget review will occur in three stages. Firstly, lawmakers will vote on the fiscal framework and revenue proposals to establish economic policy and outline government spending limits. The second stage involves examining the division of revenue bill, which defines the fund distribution among national, provincial, and local government. Lastly, the appropriation bill undergoes voting, allocating resources to specific departments and programs. Each subsequent bill depends on the prior one’s approval. Lawmakers have until April 3 to approve the initial framework, with some flexibility for delays.
If the budget is not approved by the onset of the new fiscal year on April 1, existing laws permit continued spending at a maximum of 45% of the budget from the prior year until parliamentary approval is secured. Notably, new budget allocations cannot be enacted without parliamentary consent. However, the National Treasury indicated that the VAT hike could potentially be enacted as early as May 1, irrespective of the budget’s status, with a stipulation that changes made post-implementation would not necessitate repayment of the imposed tax.
The current political climate presents a critical challenge for the African National Congress (ANC), which has lost its parliamentary majority. ANC Secretary-General Fikile Mbalula stated the party’s readiness to engage with all political factions to facilitate the budget’s passage. Godongwana remains receptive to suggestions from lawmakers for budget adjustments, emphasizing the necessity to comprehend the difficult implications associated with these changes.
In summary, South Africa’s lawmakers face the complex task of reviewing the 2025 budget amid a proposed VAT hike. With a timeline leading up to April 3 for approval, the government may continue previous budgetary spending if necessary. The ANC must navigate a fragmented political landscape to secure the budget’s passage, while the VAT increase could still be implemented independently by the National Treasury, raising further questions about fiscal policy implementation. Overall, collaboration among parties appears vital for a successful budget outcome.
Original Source: money.usnews.com
