South Africa’s National Treasury has proposed a reduced value-added tax (VAT) hike in a revised budget, aiming to end the deadlock within the coalition government.
The initial proposal of a 2-percentage-point VAT increase was met with opposition from the African National Congress’ biggest coalition partner, forcing the budget to be postponed.
The revised proposal suggests raising VAT by 0.5 percentage points from its current level of 15% on May 1, followed by another 0.5-percentage-point increase in 2026.
However, the leader of the Democratic Alliance, John Steenhuisen, has stated that his party still opposes the budget in its current form.
The proposed VAT hike aims to generate an additional 28 billion rand ($1.53 billion) in revenue for the fiscal year starting April 1, 2025.
The budget deficit is expected to be 5.0% of gross domestic product (GDP) in the 2025/26 fiscal year, with debt peaking at 76.2% of GDP.
