<\/p>\n
The South African government’s 2025\/26 budget, unveiled by Finance Minister Enoch Godongwana on Wednesday, faces an uncertain future with the DA announcing its intention to withhold support due to the proposed 0.5% increase in Value Added Tax (VAT).<\/p>\n
The DA is the second largest party in the Government of National Unity (GNU) and the situation could spell trouble for the government’s budgetary plans which relies heavily on coalition cooperation.<\/p>\n
Tabling the 2025\/26 budget in Parliament, Finance Minister Enoch Godongwana said there were persistent spending pressures in health, education, transport and security.<\/p>\n
\u201cThe government proposes to increase the VAT rate by half a percent point in 2025\/26, and by another half a percent point the following year. This will bring the VAT rate to 16% in 2026\/27,\u201d Godongwana said.<\/p>\n
But DA leader John Steenhuisen, speaking after Godongwana’s budget speech, said they would not be voting for the budget in its current form.<\/p>\n
\u201cWe have been very clear from the beginning that we don\u2019t believe a VAT increase is the right way to proceed especially if it is not accompanied with bold economic reforms and focus on economic growth,\u201d Steenhuisen said.<\/p>\n
He said that there was no focus on growth and the government would again be in a scramble for money come later in October and February next year.<\/p>\n
\u201cThere are number of huge bold announcements that could have been made today and send the right message.\u201d<\/p>\n
Steenhuisen said for the budget to be passed, the ANC, which has 39% of the vote, would need 50% plus one and parties wanting to support the increase of 1% over two years can do so.<\/p>\n
\u201cWe are willing to keep the door open to discuss before the issue comes to the floor of Parliament. There is still some time for us to have another chat and another look at what to negotiate on further,\u201d he said.<\/p>\n
\u201cIf we do not to take bold decisions that go hard for growth and jobs, we will not lend our support and vote for the budget,\u201d Steenhuisen said.<\/p>\n
ANC and Mineral and Petroleum Resources Minister Gwede Mantashe said they had been engaging with the DA, their coalition partner, for some time.<\/p>\n
\u201cThey want to counter pose everything else on battles they lost,” said Mantashe in reference to the Basic Education Laws Amendment Bill, Expropriation Bill and the National Health Insurance Act.<\/p>\n
\u201cWe say we can\u2019t counter the processes of a budget. We can\u2019t succumb to that. They exchange political issues for the budget,\u201d he said.<\/p>\n
He was optimistic that other parties would support the budget as it focused its allocation on spending in education, health and social grants, among others.<\/p>\n
\u201cThose are the issues that talk to our people… not half percent of VAT,\u201d Mantashe said, before warning that a failure to pass the budget would polarise the country along racial lines.<\/p>\n
When tabling the budget Godongwana said the government was proposing no inflatory adjustment to personal income tax brackets, rebates and medical aid credits.<\/p>\n
\u201cThese measures will raise R28 billion in additional revenue in2025\/26 and R14.5 billion in 2026-27,\u201d he said.<\/p>\n
He said the government has thoroughly examined the alternatives to raising VAT rate.<\/p>\n
\u201cWe weighed up the policy trade-offs involved, including increases to corporate tax and personal incomes taxes. Increasing corporate or personal tax rates would generate less revenue while potentially harming investments, job creation and economic growth,\u2019 Godongwana said.<\/p>\n
He also said the government was aware of the cost\u2013of-living pressures faced by households, including the high food and fuel process and rising electricity and transportation costs.<\/p>\n
\u201cThe government proposes to provide the social grant increase that are above inflation as well as expanding VAT zero-rated food items.<\/p>\n
\u201cWe are also not increasing the fuel levy for another year, saving consumes around R billion.\u201d<\/p>\n
However, other parties have rejected the VAT increase with MK Party parliamentary leader John Hlophe saying Godongwana had other options available.<\/p>\n
\u201cIncreasing VAT by any percentage is disastrous. The people who are to suffer the most are black people,\u201d Hlophe said.<\/p>\n
UDM parliamentary leader Nqaboyomzi Kwankwa said it was difficult not to support the budget.<\/p>\n
\u201cOne has to take a decision that takes the county forward. We are not happy with some of the proposals,\u201d said Kwankwa, adding that crafting a budget was a balancing act.<\/p>\n
Cosatu parliamentary counselor Matthew Parks said the labour federation was disappointed by the VAT increase proposal.<\/p>\n
\u201cThis is to make the life more difficult for people who drown in debt, who are straining to survive with the cost of living,\u201d he said.<\/p>\n
Parks said there were other alternatives in place to the VAT increase.<\/p>\n
Economist Dawie Roodt said he doubted if the budget would be passed if the DA did not vote for it, even if the ANC approached the MK Party or the EFF.<\/p>\n
\u201cThere is no way the EFF and MK Party will vote for VAT. It is not going to happen,\u201d he said.<\/p>\n
Roodt said should the budget be not passed, Godongwana would have to go back to the drawing board and redraft it,\u201d he said.<\/span><\/p>\n In response to Godongwana\u2019s budget speech, civil society organisation Black Sash expressed concern, saying the minister failed to prioritise investment in the majority of those residing in South Africa.<\/p>\n “While it would be expected that we should be grateful for the social grant increases, and the extension of the Social Relief of Distress (SRD) Grant, it begs the question whether it is enough of a buffer to counter the VAT increase of 0.5% increase which disproportionality affects the poor,” spokesperson Oliver Meth said.<\/p>\n Pietermaritzburg Economic Justice & Dignity Group’s, Mervyn Abrahams said that there were other possibilities for Godongwana to increase revenue, other than relying on VAT.<\/span><\/p>\n “While there are good things in the budget, we are still surprised that he increased VAT even by a lower percentage as that will have an impact across the entire economy, making all goods and services more expensive.”<\/span><\/p>\n Abrahams said<\/span> a tax holiday on the Government Employees Pension Fund would have been a better alternative.<\/span><\/p>\n mayibonwge.maqhina@inl.co.za<\/p>\n","protected":false},"excerpt":{"rendered":" The South African government’s 2025\/26 budget, unveiled by Finance Minister Enoch Godongwana on Wednesday, faces an uncertain future with the DA announcing its intention to withhold support due to the proposed 0.5% increase in Value Added Tax (VAT). The DA is the second largest party in the Government of National Unity (GNU) and the situation […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[2746,2735,846,8959,12686,17738],"class_list":["post-234377","post","type-post","status-publish","format-standard","category-politics","tag-balance","tag-budget","tag-hangs","tag-increase","tag-opposes","tag-vat"],"yoast_head":"\n