South Africa will not implement the planned VAT increase, keeping the rate at 15%. This decision responds to political opposition and legal challenges. Finance Minister Enoch Godongwana is to introduce revised budget bills, acknowledging an expected revenue shortfall of 75 billion rand.
The South African finance ministry announced that it will not proceed with the planned increase in value-added tax (VAT) initially set to take effect on May 1, as outlined in the 2025 budget. The National Treasury had intended to raise VAT by one percentage point over two years, but this proposal faced significant opposition from various political factions.
VAT will remain fixed at 15%, according to the ministry’s statement. Finance Minister Enoch Godongwana is anticipated to present a revised Appropriation Bill and a Division of Revenue Bill within the forthcoming weeks. Acknowledging the halt in VAT increase, the ministry noted that this decision may result in an estimated revenue shortfall of approximately 75 billion rand ($4.02 billion) in the medium term.
“Parliament will be requested to adjust expenditure in a manner that ensures that the loss of revenue does not harm South Africa’s fiscal sustainability,” the ministry remarked. Within the coalition government, particularly between the African National Congress and the Democratic Alliance, there have been notable disagreements over the proposal to raise VAT incrementally. Moreover, the legality of this VAT increase initiative has also been the subject of a court challenge.
In conclusion, the South African government has opted against the anticipated VAT increase, maintaining the current rate at 15%. This decision follows substantial political opposition and potential legal challenges. As a result, the government must now address a projected revenue deficit while ensuring fiscal sustainability.
Original Source: www.tradingview.com
