Finance Minister Enoch Godongwana faced calls from some opposition parties to step down after he scrapped a proposed increase in the value-added tax. (Jeffrey Abrahams/ Gallo Images)
Finance Minister Enoch Godongwana said he sees no reason to resign following his U-turn on a proposed tax increase that threatened to rupture the nation’s coalition government.
Godongwana faced calls from some opposition parties to step down after he scrapped a proposed increase in the value-added tax. The reversal came days after he said he sees no alternative to the increase, which was set to raise the levy to 15.5% from 15% on May 1.
“It is my constitutional job to propose money bills in parliament,” Godongwana told Bloomberg TV in Washington, on the sidelines of the International Monetary Fund and World Bank Spring Meetings. “I’ve not done anything untoward by proposing revenue in terms of the constitution. Over the years I’ve managed this budget properly and this economy properly.”
The proposed VAT hike threatened to unravel the government of national unity formed by the ANC in June after it failed to win an outright majority in elections. The Democratic Alliance, the second largest partner in the alliance, went to court to block the increase and opposed it in parliament.
The move leaves questions over how the resulting R75 billion budget gap will be filled, and what now happens to the so-called government of national unity. Godongwana said the government would have to re-evaluate its spending proposals.
“On expenditure side, there will be consequential implications in terms of some of the items that will not be funded,” he said. While he was not part of the political discussions around the future of the coalition, the removal of the VAT increase made it possible to have a “rational discussion” on the budget, he said.
There would be no “red lines or non-starters” in those talks, he added.
