By Thebe Mabanga
Finance Minister Enoch Godongwana has withdrawn the proposed VAT hike of 0,5% over the next two years, in a move that the National Treasury says will cost R75 billion over the next three years.
It now remains to be seen what revenue boosting measures or spending cuts will be introduced to mitigate this. The latter seems more likely.
The Treasury announced that Godongwana will introduce the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill, commonly known as the Rates Bill, which proposes to maintain VAT at 15% from 1 May 2025.
“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 in a statement.
The ANC caucus in Parliament and the Economic Freedom Fighters (EFF) have already welcomed the withdrawal.
The caucus pointed out it was an outcome of the 30-day period proposed by the parties that supported the Fiscal Framework and Revenue Proposals on April 2. This implies that the resolution excludes the Democratic Alliance.
“Together, and considering the views of South Africans across the party-political divide, the parties extensively engaged with the Minister of Finance on the proposed VAT increase, leading to today’s announcement,” it said in a statement on Thursday.
Meanwhile, the DA’s Helen Zille said that the party was approached by the finance minister for an out-of-court settlement on its VAT interdict.
“The DA is awaiting a formal written offer from the minister’s lawyers before we respond to the request, and we will update the public in due course of any developments,” she said
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