S-Africa scraps VAT increase

2025-04-26 07:50:41

(MENAFN) South African Finance Minister Enoch Godongwana has announced the cancellation of a planned 0.5% increase in the Value Added Tax (VAT), which was set to take effect on May 1. The VAT rate will remain at 15%.

The decision to abandon the increase came after extensive consultations with political parties and careful consideration of parliamentary committee recommendations, as confirmed by the National Treasury on Wednesday night.

By scrapping the VAT hike, the government is expected to lose approximately R75 billion in revenue over the medium term. The Treasury also revealed that Godongwana had informed the Speaker of the National Assembly, Thoko Didiza, about the withdrawal of the plan. Parliament will now need to adjust its expenditure to ensure that the revenue shortfall does not threaten South Africa’s fiscal stability.

The removal of the VAT hike means that the measures designed to protect low-income households from the increase will be canceled, and other expenditure decisions will need to be revisited. To offset the financial adjustments, any additional revenue collected by the South African Revenue Service (SARS) may be used for this purpose.

Godongwana also indicated that a revised version of the budget will be presented without the VAT increase. The original proposal for the VAT hike was driven by the urgent need to restore funding for essential frontline services that had faced budget cuts.

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