Image Source: Knysna-Plett Harold
Local – Finance Minister Enoch Godongwana has announced that the government will not proceed with the proposed increase in Value Added Tax (VAT) following strong public opposition and political debate. The decision was confirmed during the revised 2025 Budget Speech delivered in Parliament.
“There is clarity now: VAT will remain at 15 per cent. This decision reflects our commitment to listen to South Africans, and to all the political parties represented in this House,” Godongwana said.
The reversal follows weeks of criticism after the March 12 budget, which had proposed raising VAT to increase revenue. With that proposal now withdrawn, Treasury faces a projected shortfall of R61.9 billion over the next three years.
“The decision to do away with the VAT increase, without a viable alternative source of revenue, significantly reduced our ability to fund additional government programmes and projects to the extent we had deemed necessary,” the minister explained.
To recover some of the lost revenue, the government will raise the general fuel levy for the first time in three years. From 4 June, the levy will increase by 16 cents per litre for petrol and 15 cents for diesel.
“To this end, this budget proposes an inflation-linked increase to the general fuel levy. For the 2025/26 fiscal year, this is the only new tax proposal that I am announcing,” Godongwana said.
Although the VAT decision was welcomed, the fuel levy hike will add to transport costs, likely affecting the price of food and other essentials. This comes as many households continue to face financial strain.
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Public Concern Over Wasteful Spending Acknowledged
Godongwana also acknowledged widespread frustration with wasteful government spending. He stressed that public trust depends on tax compliance and ensuring that money is used effectively.
“We are not deaf to the public’s concern about wasteful and inefficient expenditure. Our commitment to collect taxes must be matched by better efficiency in how that money is spent,” he said.
An additional R7.5 billion will be allocated to the South African Revenue Service (SARS) to improve enforcement and reduce tax leakages to support revenue recovery efforts.
The funds will strengthen SARS’s enforcement capacity, modernise its systems, and boost its ability to collect outstanding taxes and curb illicit trade.
“We have allocated an additional R7.5 billion over the MTEF to increase the effectiveness of the South African Revenue Service in collecting more revenue. Part of this allocation will be used to increase collections from debts owed to the fiscus,” Godongwana said.
The minister confirmed that new tax measures may still be required in 2026 to raise R20 billion, depending on SARS’s performance.
While the VAT climbdown eases consumer pressure, the Treasury remains constrained in its ability to expand spending. The fuel levy increase points to the difficult choices that lie ahead.
“Our journey toward national prosperity belongs to every South African. Today is about delivering on the hope for a better life and a better future. It is an attempt to meet our shared goals of redistribution, redress and structural transformation,” said Godongwana.
