Image Source: The Witness
Local – The VAT increase will be scrapped, with the National Treasury confirming that the rate will remain at 15% from 1 May 2025. This follows weeks of consultations with political parties and a review of recommendations from parliamentary committees.
The Treasury has acknowledged that keeping the VAT rate unchanged will leave a projected revenue shortfall of about R75 billion over the medium term. In response, Finance Minister Enoch Godongwana has written to the Speaker of the National Assembly, formally withdrawing the Appropriation Bill and the Division of Revenue Bill.
According to the Treasury, “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.”
Treasury added that if the South African Revenue Service (SARS) collects additional revenue, it may be used to ease the impact of the spending cuts, particularly in areas most affected by the withdrawal of planned support measures.
The VAT hike was originally proposed to help fund essential services. Still, the Treasury has since admitted that many of the alternatives presented during public engagements were either too delayed in generating revenue or negatively affected growth and employment.
“There are many suggestions. However, some of them would create greater negative consequences for growth and employment and some of them, while worthwhile, would not provide an immediate avenue for further revenue in the short term to replace a VAT increase,” the department said.
A revised version of the Appropriation Bill and the Division of Revenue Bill is expected to be introduced in the coming weeks.
EFF Slams Budget Process, Calls for Resignations
Among the strongest critics of the VAT hike was the Economic Freedom Fighters (EFF), who welcomed its withdrawal but delivered a scathing assessment of the entire 2025 budget process.
“The EFF notes and welcomes the decision by the incompetent Minister of Finance, Enoch Godongwana, and the National Treasury to withdraw the misguided, ill-conceived, and reckless 2025 Budget,” the party said.
They stated the budget, first tabled in February and revised in March, “fails to appreciate the degree and depth of the economic crisis South Africa is confronted with.”
It “failed to respond decisively to the crisis of unemployment and poor economic growth that now threatens a national economic collapse.”
The party added that the withdrawal of the bills “renders the 2025 Fiscal Framework – adopted illegally through deceit and lies – redundant. It means that the Minister of Finance has failed to comply with the legal and constitutional obligations governing the budget process.”
The EFF is now demanding that all correspondence from the Minister be made public and that Parliament urgently convene a meeting of all party leaders.
“Effectively, the country does not have a budget,” the party warned, pointing out that the legal deadline to table a lawful budget had passed on 31 March, in terms of the Public Finance Management Act.
The party also called for the immediate resignation of both Minister Godongwana and the Director-General of the National Treasury, arguing that “they are out of depth and pose a threat to the economic stability of the country and, by consequence, are a threat to the livelihoods of South Africans.”
