VAT U-TURN! – Treasury drops hike after public outcry

Godongwana

Cape Town – The South African Treasury has reversed the proposed VAT increase, maintaining the rate at 15%.

The decision ends a two-month legal and political battle over the unpopular hike, which was initially set to rise to 15.5% on 1 May 2025, with another increase planned for April 2026.

Finance Minister Enoch Godongwana will introduce a new bill to keep VAT at its current rate, following consultations with political parties and parliamentary committees.

“The Minister of Finance will shortly introduce the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill (Rates Bill), which proposes to maintain the Value-Added Tax (VAT) rate at 15 per cent from 1 May 2025, instead of the proposed increase to VAT announced in the Budget in March,” the Treasury said.

“The decision to forgo the increase follows extensive consultations with political parties, and careful consideration of the recommendations of the parliamentary committees. By not increasing VAT, estimated revenue will fall short by around R75 billion over the medium term.”

Treasury said that Godongwana has notified National Assembly Speaker Thoko Didiza of his decision to retract both the Appropriation Bill and the Division of Revenue Bill, paving the way for revised spending plans aimed at addressing the projected revenue shortfall.

“Parliament will be requested to adjust expenditure in a manner that ensures that the loss of revenue does not harm South Africa’s fiscal sustainability.

“The decision not to increase VAT means that the measures to cushion lower income households against the potential negative impact of the rate increase now need to be withdrawn and other expenditure decisions revisited,” the Treasury said.

This reversal is expected to result in a R75 billion revenue shortfall over the medium term.

Consequently, Parliament will be asked to adjust expenditures to maintain fiscal sustainability.

The reversal also means that planned relief measures for low-income households will be withdrawn, and other budget allocations revisited.

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