Treasury opts to increase VAT to deal with Budget deficit

By Simon Nare

Finance Minister Enoch Godongwana has stuck to his guns and gone with the unpopular decision of raising VAT by 0.5% percentage point this financial year, and another half percentage point next year to raise much-needed funds for the Budget.

Tabling his Budget speech in the National Assembly on Wednesday, Godongwana said he simply had no choice as borrowing more would further sink the country into debt.

He said the proposal would raise R28 billion in 2025/26 and another R14.5 billion in the 2026/27 financial year.

“This decision was not made lightly. No minister of finance is ever happy to increase taxes. We are aware of the fact that a lower overall burden of tax can help to increase investment and job creation and also unlock household spending power.

“We have, however, had to balance this knowledge against the very real, and pressing, service delivery needs that are