Godongwana Drops VAT Hike After Political Pushback

Finance Minister Enoch Godongwana has officially abandoned plans to raise the Value Added Tax (VAT) rate from 15% to 15.5%—a move initially set for 1 May 2025. The reversal comes after intense political pressure, parliamentary scrutiny, and widespread concern about the burden the increase would place on lower-income households.

In a statement released Wednesday night, the National Treasury confirmed that the decision followed consultations with political parties and careful consideration of Parliament’s recommendations. The VAT rate will now remain unchanged at 15%, despite the R75 billion revenue shortfall projected over the medium term.

Treasury also confirmed that Godongwana has formally notified National Assembly Speaker Thoko Didiza of the decision and will submit a revised budget that does not include the VAT hike.

Parliament will now be expected to explore alternative expenditure adjustments to ensure fiscal stability. Treasury acknowledged that the scrapped increase would have required protective measures for poor households, which must now also be withdrawn.

“To offset the unavoidable expenditure adjustments, any additional revenue collected by SARS may be considered for this purpose going forward,” Treasury stated.

The VAT hike had originally been proposed to help recover funding for frontline services that had faced cuts. With that plan now abandoned, Treasury is looking at other ways to balance the books while avoiding further financial strain on already vulnerable citizens.

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Sourced:IOL

Picture: Parliament