ANC Set To Scrap 0.5% VAT Hike After GNU Backlash: Report

The ANC appears ready to abandon its proposed 0.5% VAT increase following fierce opposition from its Government of National Unity (GNU) partners, including the DA, The Sunday Times can reveal.

Budget U-Turn: Key Details

• Original Plan: Finance Minister Enoch Godongwana initially proposed a 2% VAT hike in February, later reduced to two 0.5% increases over two years.
• GNU Resistance: The DA and other parties refused to support any VAT rise, forcing the ANC to reconsider.
• May 1 Deadline: Businesses had already begun invoicing at the new 15.5% rate, but the hike may now be scrapped entirely.
• R13.5bn Budget Gap: Dropping the tax increase leaves a major revenue shortfall, pushing Treasury to find alternatives.

Why This Matters

• Political Tensions: The dispute pushed the GNU to the brink, with ANC leaders accusing the DA of “defining itself out” of the alliance.
• Economic Impact: Reversing the hike could prevent consumer price surges but complicates South Africa’s fiscal stability.
• Last-Minute Talks: The Sunday Times reports that a recent ANC-DA meeting sealed the VAT hike’s fate, with “zero support” left in Parliament.

What’s Next?

With the May 1 deadline looming, Godongwana must now:

1. Formally withdraw the VAT proposal.
2. Find alternative revenue sources to cover the R13.5bn gap.
3. Secure GNU consensus to pass the revised budget.

An ANC insider told The Sunday Times:

“The VAT increase is dead. Treasury must find another way—R13bn is nothing in the bigger scheme.”