In a dramatic U-turn, the National Treasury has confirmed that South Africa's Value-Added Tax (VAT) rate will remain at 15%, reversing a planned increase that was set to take effect next Thursday. The announcement, made in a late-night statement, revealed that Finance Minister Enoch Godongwana has decided to withdraw the proposed half-a-percentage-point hike.
The decision, described by Treasury as a result of "extensive consultations" with political parties and "careful consideration" of parliamentary committee recommendations, marks a significant shift in government’s fiscal strategy.
Had it gone ahead, the VAT increase would have been the first since 2018. Minister Godongwana acknowledged that shelving the plan would leave a projected R75 billion shortfall in government revenue over the medium term. To mitigate the impact, he said Parliament would be asked to revise public expenditure to safeguard fiscal sustainability.
The reversal also follows a recent legal challenge filed by the Democratic Alliance (DA) and the Economic Freedom Fighters (EFF), which questioned the constitutionality of the process used to adopt the VAT increase.
As fiscal tensions remain high, all eyes will now be on Parliament’s next move in the balancing act between public revenue and national expenditure.