Cape Town – Finance Minister Enoch Godongwana has confirmed that South Africa’s Value Added Tax (VAT) will increase by 0.5 percentage points on May 1, 2025, with another 0.5 percentage point rise planned for April 1, 2026.
Reports on Thursday said that he justified the hike by warning of severe consequences to state finances if it is not implemented, including spending cuts or increased borrowing.
“Government would be immediately forced either to cut expenditure or increase borrowing,” IOL quoted Godongwana as saying.
He defended VAT as a broad-based and efficient revenue source, adding that South Africa’s current VAT rate remains relatively low compared to other countries.
Finance Minister Enoch Godongwana says that VAT will increase on 1 May, as the announcement in his budget speech remains in force, retailers have adjusted their pricing, and the DA’s court bid to stop the hike has no legal basis. | @politicsblahblahttps://t.co/YptfDIP5jq
— News24 🇿🇦 (@News24) April 17, 2025
“In making this decision, the government carefully considered the potential contributions of each of the main tax instruments. VAT is an efficient source of revenue. It is broad based, and its design is simple with minimal exceptions.
“Moreover, South Africa’s VAT rate is still relatively low compared with peer countries,” he said.
[WATCH] Finance Minister Enoch Godongwana on VAT hike: “Parliament must make choices on certain policies that will ensure that the fiscal framework balances, the policy choices are made by political parties, not me.” #Newzroom405 pic.twitter.com/AZ4z19NtHS
— Newzroom Afrika (@Newzroom405) April 16, 2025
The Democratic Alliance (DA) and Economic Freedom Fighters (EFF) have taken legal action, with the DA arguing that the budget process was unconstitutional and would harm already struggling citizens.
Part one of the DA’s case will be heard on April 22.
The VAT increase has intensified tensions within the Government of National Unity (GNU), with disagreements between the ANC and its coalition partners, raising concerns about the stability of the alliance.
Follow African Insider on Facebook, Twitter and Instagram
Picture: X/@GovernmentZA
For more African news, visit Africaninsider.com
Compiled by Betha Madhomu
