SA Still Embroiled in Tax Disputes Between Ruling Alliances

(3 Minutes Read)

The tax increase is meant to generate over 15 billion rand (about USD 800 million) in revenue annually to fund health, education, and social services programs. Already, the budget had been revised to address foreign aid cuts by the new U.S. administration. 

The South African government is still embroiled in a tax row between the ruling African National Congress party (ANC) and the Democratic Alliance (DA). The DA party has taken the government to court seeking to bar the 0.5% VAT increase to 15.5% as proposed by the government. This increase is set to take effect on 1st May.

The government of South Africa has maintained that a 0.5% increase in VAT will help the country offset its budget deficit of R13.5bn.  The Democratic Alliance, which joined the government after the long-ruling African National Congress lost its parliamentary majority last year, said it could not support a tax increase that would further burden the poor majority of the country’s population.

VAT is payable on goods and services, including food and electricity. Opposition parties and civil society have criticized the proposed budget as anti-poor. According to the latest budget, more than 20 million people in South Africa rely on welfare grants, with the unemployment rate at over 32%.

The tax increase is meant to generate over 15 billion rand (about US$800 million) in revenue annually to fund health, education, and social services programs. Already, the budget had been revised to address foreign aid cuts by the new U.S. administration.

This is the latest disagreement between the two main parties after the ANC lost its 30-year parliamentary majority in its worst-ever electoral performance last year.

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The ANC and DA have ideological differences on issues including foreign policy, land reform, education, and health sector reforms. On Wednesday, a small party outside the unity government, ActionSA, unexpectedly tipped the scales in favour of the ANC to pass the budget.