South Africa’s finance minister wanted to raise VAT: the pros and cons of a tricky tax

By Andrew Robert Donaldson

South Africa’s finance minister, Enoch Godongwana, cancelled the unveiling of the country’s 2025 budget as it was due to be released. The move is unprecedented in the country’s history.

The reason for the abrupt cancellation was the failure of the minister to get cabinet approval for the proposal to raise value added tax (VAT) from 15% to 17%. VAT is the second biggest contributor to tax collection after personal income tax, followed by corporate taxes.

The strongest opposition to the idea came from parties that have joined the African National Congress in a government of national unity which was formed after the ruling party lost its majority in polls in June 2024.

To understand the finance minister’s efforts to raise VAT it’s helpful to revisit the revenue proposals of a year ago.

In the 2024 budget, all the additional revenue was to come from a “stealth tax” on personal income. Because personal