South Africa’s Finance Minister Enoch Godongwana has warned that failing to raise the value-added tax (VAT) rate by 0.5% in May would severely harm state finances, risking cuts to government spending or increased borrowing. The proposal to raise VAT has sparked a dispute within the coalition government, with the Democratic Alliance challenging its legality in court. Godongwana stressed that scrapping or delaying the increase would create a major revenue shortfall, threatening the country’s financial stability. However, the African National Congress-led government has failed to muster support for the proposed hike, leading to speculations that it will stop insisting on a hike. Meanwhile, some political parties have suggested alternative solutions like expenditure cuts instead of the proposed hike.
Reuters
