Godongwana Accuses DA of Contradicting Its Own Stance on Tax Increases
Finance Minister Enoch Godongwana has criticised the Democratic Alliance (DA) for what he described as an inconsistent stance on tax increases in the 2025/26 Budget.
Speaking during a joint meeting of finance committees in Parliament, he challenged the DA’s recent opposition to tax hikes, arguing that the party had previously supported similar measures, including a proposed increase in Value Added Tax (VAT).
According to Godongwana, the DA had initially proposed tax increases during discussions following the Budget’s postponement. He explained that the party had agreed to a 1% VAT hike over two years during talks within a Cabinet subcommittee.
Additionally, he confirmed that the DA had sent a letter to President Cyril Ramaphosa accepting a 0.5% VAT increase in exchange for unrelated policy concessions, such as the scrapping of the Expropriation Act.
Following the Budget postponement on 19 February, Ramaphosa formed a small team including DA leader John Steenhuisen to explore alternatives.
The team met several times and developed five options. The first, proposed by the DA, included no tax relief but suggested increases in the fuel levy, medical tax credits, and alcohol-related taxes.
Godongwana argued that the DA’s recent claims of opposing all tax increases were therefore misleading.
The final budget proposal, developed by a team led by Deputy President Paul Mashatile, combined elements of different options, ultimately settling on a 0.5% VAT increase over two years.
Spending Reviews and Budget Implementation
Godongwana also addressed the DA’s argument that spending reviews should be used to cut unnecessary government expenditure instead of raising taxes.
While acknowledging that some reviews had revealed excessive spending such as government rental costs being 45% above market price, he pointed out that implementing these recommendations would take time and would not yield immediate financial relief.
He emphasised that addressing inefficiencies in government spending could face legal challenges and bureaucratic resistance, making it unrealistic to rely on spending reviews as a short-term solution.
Parliamentary Role in Budget Amendments
The finance minister reiterated the National Treasury’s willingness to engage with Parliament on possible budget adjustments, as long as discussions remained focused on making the budget more efficient.
He acknowledged Parliament’s authority to amend the budget but urged that changes be practical and aligned with fiscal sustainability.
National Treasury Director-General Duncan Pieterse also briefed the committees on the spending pressures facing the country, including education, healthcare, security, and infrastructure.
He stressed that these priorities necessitated additional funding, which required tax increases.
He warned that borrowing to cover government expenses would undermine South Africa’s fiscal credibility, leading to higher interest rates and increased borrowing costs, ultimately limiting resources for essential services.
Parliament’s Upcoming Vote
Finance Standing Committee Chairperson Joe Maswanganyi clarified that when Parliament votes on the budget on Tuesday, it will be voting on the broader fiscal framework rather than specific tax measures like VAT.
He explained that the fiscal framework governs key financial policies, including revenue projections, expenditure plans, economic assumptions, and overall budget priorities.
Maswanganyi added that VAT adjustments fall under the VAT Act and can be implemented at a later date, subject to parliamentary approval within 12 months. If Parliament wishes to reject or amend any tax proposals, it must do so through the legislative process.
As tensions within the Government of National Unity (GNU) continue to mount, the fate of the budget and the proposed VAT increase bc remains uncertain.