JOHANNESBURG – Finance Minister Enoch Godonwana has finally concluded the fight over the proposed increase in value-added tax (VAT) in the overnight move.
The Minister of Finance issued a statement saying, “We will soon introduce an amendment to the Tax Rate, Amount and Revenue Act (Fees Bill) that proposes to maintain the Value Added Tax (VAT) tax rate at 15% from May 1, 2025.”
The move ended the rise in VAT announced in the budget in March, and was filled with massive public protests by political parties and court lawsuits.
“The decision to abandon the increase will follow extensive consultations with political parties and carefully consider the recommendations of the Congressional Committee,” the statement said.
“Without increasing VAT, estimated revenues will be shortened by roughly R75 billion over the medium term.”
“As a result, the Minister of Finance has written to the Speaker of the Parliament to show that he has withdrawn the budget bill and revenue bill to propose spending adjustments to cover this revenue shortage.”
Parliament is required to adjust spending in a way that ensures that losses in revenue do not harm South Africa's financial sustainability.
“The decision not to increase VAT means that measures to mitigate low-income households against the potential negative impact of rate increases should be withdrawn and other spending decisions should be reconsidered.
“Additional revenue collected by SARS to offset the inevitable spending adjustments may be considered for this purpose in the future.”
The Finance Minister XXX said he expects to introduce an amendment to the Expenditure Bill and the Revenue Division Act in the coming weeks.
“The initial proposal to increase the VAT rate was motivated by the urgent need to restore and replenish funds for key frontline services that had suffered from the cuts required by the country's constrained financial position,” the statement said.
“There are many proposals, but some of them produce significant negative outcomes for growth and employment, and some of them do not provide an immediate means for further revenue in the short term to replace the increase in VAT.
“However, the Department considers these and other proposals as potential revisions to future budgets as mechanisms to increase the resources available.”
Meanwhile, the Democratic Union (DA), which opposed the rise in VAT, said:
The party was challenging the issue at the Western Cape High Court.
