Godongwana Clings To Vat Increase But Halves Initial Proposal

Finance Minister Enoch Godongwana on Wednesday announced a VAT increase of one percentage point over two years, halving the size of the unpopular measure that saw him forced to abandon his initial budget in February for lack of political support.

A hike of half a percentage point will be implemented from 1 April, followed by another in the next financial year, which will bring VAT to 16 in 2026. Godongwana also opted not to adjust personal income tax brackets for inflation for the second year in a row, reversing his initial decision in this regard last month.

The adjusted tax proposals follow three weeks of bitter wrangling in the ruling coalition over his plans for a VAT hike. The debate continued late into Tuesday as President Cyril Ramaphosa briefed fellow leaders of political parties in the government of national unity on the ministers plans.

A cabinet meeting shortly before the tabling of the budget ran into overtime as the contestation continued.

The Democratic Alliance DA, the ANCs biggest coalition partner, has remained adamant that it would not support any VAT increase, leaving the question of whether it will vote for the revised budget open or force a parliamentary amendment of the fiscal framework in the next fortnight.