Finance Minister Enoch Godongwana has warned that spending cuts or a rise in other taxes could follow/SCREENGRABThe party of South Africa's President Cyril Ramaphosa has reversed a controversial proposed value-added-tax (VAT) rise that had threatened the country's coalition government.
The hike was proposed by the African National Congress (ANC) but was strongly opposed by the Democratic Alliance (DA), its main coalition partner in the unity government, which had even asked the courts to block it. Other opposition parties also opposed it.
The reversal of the proposed 0.5% tax hike comes just days before it was due to take effect.
The finance ministry said the decision came after consultations with political parties and parliament, but warned that it would cause a significant deficit in revenue.
The reversal of the tax rise is likely to be welcome news for many South Africans, most of whom are already burdened by a stagnant economy and the rising cost of living.
On Thursday, the finance minister said, "the decision not to increase VAT means that the measures to cushion lower income households against the potential negative impact of the rate increase now need to be withdrawn and other expenditure decisions revisited".
In February, Godongwana had to postpone his budget presentation after fierce resistance to the proposal to increase VAT.
The row comes at a challenging time for the government.
