South Africa's VAT Hike Standoff Threatens Government Stability

South Africa faces a political standoff over a proposed VAT hike. Finance Minister Enoch Godongwana warns that failing to implement the increase could harm state finances. The African National Congress and the Democratic Alliance are split on the issue, risking coalition stability.

South Africa's current tax debate has escalated into a political showdown, with the Finance Minister Enoch Godongwana emphasizing the potential fiscal repercussions if a proposed 0.5 percentage point VAT increase is delayed or abandoned.

The disagreement between the African National Congress and the Democratic Alliance over the VAT plan is creating turbulence within the coalition government. The VAT is set to increase from 15% starting May 1, with further discussions planned for additional increments next year.

Despite some political movements suggesting alternate strategies, such as deeper budget cuts, Godongwana stands firm on the necessity of the VAT hike, projecting an additional 13.5 billion rand in revenue by the 2025/26 financial year.

(With inputs from agencies.)