Plan to reverse VAT hike

While South Africa’s VAT rate should increase to 15.5% on 1 May 2025, it could be back at its current level within two months due to higher revenues in the national government’s 2025/2026 budget.

Sunday Times reports that finance minister Enoch Godongwana has “responded positively” to a proposal to amend his fiscal framework with an additional R20 billion to R60 billion in revenue.

According to insiders at the National Treasury, the South African Revenue Service (Sars) estimates that its R7.5-billion funding boost will help it collect this extra revenue up to December 2025.

Sars has already identified debtors, including companies and individuals, which it will target “immediately” to boost tax collection.

National Treasury and Sars are expected to present the proposal to President Cyril Ramaphosa before a meeting of the Government of National Unity (GNU) on Wednesday, 23 April.

Numerous companies — including Afrihost, Discovery, FNB, Rain, and Vodacom — have already notified their customers that the VAT hike will impact their product and service prices.

Should the proposal proceed, the 15.5% VAT rate will only be in effect for two months, and rebates will be paid to companies and consumers to compensate for the 0.5 percentage point increase.

The VAT increase has been at the core of the budget disagreement between the ANC and two of its key GNU partners.

The largest GNU member — the ANC — failed to convince the DA and FF+ to vote in favour of the budget despite delaying its tabling for the first time since South Africa became a democracy.

The ANC subsequently approached parties outside the GNU to secure sufficient support to pass the budget.

Ultimately, 194 MPs voted in favour while 182 voted against the budget.

The table below provides a breakdown of how each party voted. The bolded parties are in the GNU and the orders are based on member numbers.

Budget legal challenge

Several of the parties that voted in favour of the budget, including ActionSA and BOSA, claimed only to have done so on condition that the VAT hike be scrapped.

ANC and IFP members on the standing committee of finance supported ActionSA’s non-binding recommendation to scrap the VAT hike and freeze personal income tax bracket adjustments.

The recommendation lacked details on how to avoid the VAT increase.

Legal experts surmised that doing so was improbable, as the finance minister himself stated it was part of the budget.

The ANC’s biggest GNU partner — the DA — and the EFF challenged Parliament’s passing of the budget in the Western Cape High Court.

The DA argued that the finance committee’s report with ActionSA’s recommendation was unlawful and unconstitutional as it violated the Money Bills Amendment Procedure and Related Matters Act of 2009.

Part of the argument is that it lacked a clear resolution to amend the fiscal framework to scrap the VAT hike.

DA federal chair Helen Zille told the Sunday Times the party was continuing its legal action as it was not aware of any VAT hike reversal plan.

“The ANC has not made any requests to us to drop the court challenge as far as I am aware,” Zille said.

According to Standing Committee on Public Accounts chair Songezo Zibi, who is also the leader of Rize Mzansi, a majority of MPs would need to support the solution when Parliament reopens in early May.