VAT increase dropped, spending cut looms

By Thebe Mabanga

Finance Minister Enoch Godongwana has withdrawn the proposed VAT hike of 0,5% over the next two years, in a move that the National Treasury says will cost R75 billion over the next three years.

It now remains to be seen what revenue boosting measures or spending cuts will be introduced to mitigate this. The latter seems more likely.

The Treasury announced that Godongwana will introduce the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill, commonly known as the Rates Bill, which proposes to maintain VAT at 15% from 1 May 2025.

“The decision to forgo the increase follows extensive consultations with political parties, and careful consideration of the recommendations of the parliamentary committees. By not increasing VAT, estimated revenue will fall short by around R75 billion over the medium term,” Treasury said in a statement.

The ANC caucus in Parliament and the Economic Freedom