SAfrica abandons VAT plan after coalition deadlock

South Africa abandoned plans to increase its value-added tax, after a proposed hike threatened to break up the country’s governing coalition.

The pro-business Democratic Alliance, the second-biggest member of the ruling alliance, had challenged the tax rise in court and opposed its inclusion in the budget, which the African National Congress only passed with the help of smaller parties.

Though the U-turn points to the DA’s apparent political strength, South Africa’s finance minister warned that scrapping the hike could have a significant toll on Pretoria’s finances: South Africa, which has one of the world’s highest unemployment rates, faces huge economic challenges, exacerbated by a diplomatic and trade standoff with Washington.