South Africans will not see an increase in VAT this May. Finance Minister Enoch Godongwana has officially reversed the decision to raise the Value Added Tax rate by 0.5%, keeping it at 15% instead of the initially planned 15.5% increase scheduled for 1 May 2025.
This follows extensive consultations with political parties and strong feedback from parliamentary committees. However, it comes at a cost. The National Treasury now estimates a revenue shortfall of approximately R75 billion over the medium term.
To address this gap, Minister Godongwana has written to the Speaker of the National Assembly to withdraw the current Appropriation and Division of Revenue Bills. These will be amended to reflect the updated revenue outlook and revised expenditure plans. The new bills are expected to be introduced within the coming weeks.
In the meantime, Parliament will be asked to explore expenditure adjustments to ensure that the country’s fiscal stability is not compromised. The minister also indicated that the measures previously planned to cushion lower-income households from the proposed VAT hike will now be withdrawn.
The VAT increase was originally introduced as part of efforts to restore funding for frontline public services, including healthcare and education, which have experienced significant budget constraints. Now, the Treasury will look toward alternative adjustments and potential additional revenue from SARS collections to fill the gap.
This reversal reflects a delicate balancing act: responding to political pressure while trying to protect the integrity of South Africa’s fiscal framework.
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