South Africa Budget update: President Cyril Ramaphosa has confirmed government, as of now, is open to explorations of alternatives to the planned VAT increase in May 2025-but that is looking less promising.
The President commented on the pandemonium surrounding the 2025 Budget, when the ANC-led Government of National Unity (GNU) narrowly passed the fiscal framework through Parliament. However, this was by no means a smooth process.
The second-largest party within the GNU, the Democratic Alliance (DA), voted against the plan due to the 1% VAT increase being implemented in two stages: 0.5% in 2025 and another 0.5% in 2026.
They attempted to push a formal amendment to the budget in Parliament’s Standing Committee on Finance, intending to send it back to the National Treasury for amendments. That proposal was rejected by the ANC, IFP, and ActionSA as an unnecessary delay.
Instead, they put a non-binding recommendation that Treasury find alternatives to raise R13.5 billion apart from VAT. Thirty days were allotted for this matter.
Treasury Says There Is No Other Way, For Now
Ramaphosa emphasized that there was serious consideration for the proposal by the government; however, Treasury’s present investigation would suggest that, almost at present, nothing better could be found as an alternative to the VAT hike.
“The resolution gives Treasury 30 days to explore other options, but so far, it looks like there aren’t any,” he said. “We’ll still examine everything, but we can’t make any promises.”
This was corroborated by the Minister of Finance, Enoch Godongwana, who stated that until someone comes forth with an alternative revenue stream, the VAT increase stays intact.
May 1 VAT Hike Looks Locked In
Seeing that even if something better was to pop up, it wouldn’t be in time, with the 0.5% VAT hike set to kick in on May 1, 2025, with an alternative report coming only after then.
Plus, it is said that the only real way of halting the VAT increase is through a law change, which is simply not going to happen before May.
Thus, whether they like it or not, the VAT increase will be felt by South Africans next month. Big banks, insurers, and mobile networks already know this-they have amended their prices and informed customers to expect increases.
Budget Still Rolling Forward
Meanwhile, the rest of the unchanged budget is moving through Parliament. The Rates and Monetary Amounts and Amendment of Revenue Laws Bill — the official legal document that includes the VAT hike and no tax bracket changes — was published last Friday.
Now it’s heading back to the finance committee and is expected to be brought up again for a vote in the National Assembly on 6 May 2025.
So right now? Unless a miracle occurs, that VAT increase is pretty well sewn up.
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