Treasury: Scrapping VAT hike will leave a R75 billion gap over next 3 years
In an overnight media statement, the Treasury announced that Finance Minister Enoch Godongwana would be reversing the decision to hike VAT.
Minister of Finance Enoch Godongwana and the finance department briefed the joint meeting with the Standing Committee on Appropriations, Select Committee on Finance and Standing Committee on Finance, Select Committee on Appropriations on the 2025 Budget Speech Picture: Phando Jikelo/Parliament
JOHANNESBURG - National Treasury said that the scrapping of the value-added tax (VAT) increase would leave it with a R75 billion gap over the next three years.
In an overnight media statement, the Treasury announced that Finance Minister Enoch Godongwana would be reversing the decision to hike VAT.
[NEWS] Enoch Godongwana, Finance Minister, has reversed the decision to increase Value Added Tax by 0,5% from the 1st of May 2025.
— EWN Reporter (@ewnreporter) April 24, 2025
The minister will be withdrawing the Appropriation and Division of Revenue bills for amendment to reflect the revenue shortfall. TCG pic.twitter.com/iwY9Jy3SSD
VAT was due to be increased by 0.5 percentage points from next week Thursday and another 0.5 percentage points next year.
This would have seen VAT go up from 15% to 16% in one year.
In several public statements and even in court papers, Godongwana repeatedly said that he could not reverse the VAT increase.
The minister had also said that Treasury could not find other ways to raise the required revenue to keep government running, outside of increasing taxes.
However, in this recent statement, Godongwana is singing a different tune.
He said that Parliament would have to adjust its expenditure to cover the R75 billion shortfall.
Godongwana said he had also considered inputs from political parties on how to achieve this.