Government and revenue: VAT delayed the budget, but an increase is still likely

By Des Kruger

The 2025 Budget will be historic not for one but two significant reasons. The first is the Government of National Unity (GNU) embodying democracy in action, the first time the Budget has been delayed in South Africa’s post-apartheid history.

The second is how the delay came about through disagreements within the GNU, the first real example of internal discord causing delays or changes in government behaviour.

At the centre of the disagreement was the proposal to increase Value-Added Tax (VAT) by 2% to 17%, or described another way, VAT in 2025 could be 13.3% higher than in 2024. The last time the government raised VAT in South Africa was in 2018 by 1% from 14% to the current rate of 15%.

Given the controversy surrounding the proposed VAT rate increase, its inclusion in the re-tabled Budget may come as a surprise. However, if the state needs to generate revenue, VAT is a highly effective