South Africa’s National Treasury has announced the withdrawal of its planned 0.5% Value-Added Tax (VAT) increase, originally set to take effect from 1 May 2025. The decision is expected to be formalised when Finance Minister Enoch Godongwana presents the Rates and Monetary Amounts and Amendment of Revenue Laws Bill to Parliament.
The Treasury said the reversal follows “extensive consultations with political parties and careful consideration of the recommendations of the parliamentary committees.” The scrapping of the increase is forecast to result in a revenue shortfall of around R75 billion over the medium term.
In a statement, the Finance Ministry confirmed that Minister Godongwana has written to the Speaker of the National Assembly to withdraw the current Appropriation and Division of Revenue Bills. Revised versions will be tabled to adjust government spending in light of the anticipated shortfall.
“Parliament will be requested to adjust expenditure in a manner that ensures the loss of revenue does not harm South Africa’s fiscal sustainability,” the Ministry said.
The government also noted that planned measures aimed at protecting low-income households from the impact of the VAT increase will now be rescinded. Instead, authorities will explore the potential use of additional revenue collected by the South African Revenue Service (SARS) to support revised expenditure plans.
The VAT increase had been proposed as a means to restore funding for essential public services affected by recent budget constraints. However, Treasury acknowledged that alternatives are being explored, though many either pose risks to economic growth and employment or are unlikely to deliver immediate revenue gains.
“While not all suggestions offer immediate solutions, the National Treasury will continue to assess these and other proposals in future budgets to bolster public finances,” the Ministry added.
Godongwana is expected to introduce the updated budget bills in the coming weeks.
