Additional taxes on taxes threatening South African government

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Additional taxes on taxes threatening South African government

South Africa's finance minister abandoned plans to increase VAT (VAT) amid a major climb to prevent the collapse of the coalition government.

Enoch Godongwana's decision comes after the second largest political party, Democratic Alliance (DA), threatened to withdraw from the government, warned of the biggest hiking trip.

Godwana, a member of the African National Assembly (ANC), believes that the increase is needed as the government faces a financial crisis.

But as other parties also rejected the hike, it raised the prospects of parliament, taking unprecedented steps to lower the national budget, forcing him and the ANC to acknowledge it.

For many South Africans, this climb is likely to ease because of their high cost of living and an unemployment rate of 32%, they are already struggling financially.

For the first time since the end of last year's elections in 1994, the ANC has lost its parliamentary majority, forcing it to share its power.

DA welcomed the climb, saying it had entered the government's “having steel bars and a clear task: to develop the economy and create jobs to rescue South Africa”.

“We oppose the unfair VAT hike on the first day – South Africa won the victory,” it said in a statement.

The DA also challenged the High Court, with three judges (heard of the case) expected to make a ruling by the end of the month.

Godongwana proposed a halving VAT, up 15.5% from May 1, saying it would help provide much-needed revenue to improve public services such as education and health.

The ANC denies that it succumbed to pressure by abandonment.

Party spokesman Mahleni Bhengu-Motsiri said the decision had been proposed: “A common commitment across parties and across parties cannot be further burdened by the poor and everyone else in this economic climate”.

The Treasury Department said in a statement that it is now necessary to revisit “other spending decisions” and reduce income households from planned VAT increases.

Economic Freedom Fighter (EFF), the second largest opposition party in parliament, said South Africa witnessed a “budget failure” and the “incompetent” Godongwana should resign.