Finance Minister Enoch Godongwana has thrown South Africans a much-needed lifeline by scrapping the controversial 0.5% Value Added Tax (VAT) increase that was set to take effect on 1 May.
VAT will now stay put at 15%.
The about-turn, announced Wednesday night, follows pressure from political parties and a stern word from parliamentary committees.
According to National Treasury, the minister carefully weighed all input before ditching the proposal.
Had it gone through, the VAT hike would’ve pulled in an extra R75 billion over the medium term.
But now, Treasury says that hole in the budget will be patched through “adjusted expenditure” and hopefully more efficient tax collection by SARS.
Godongwana has officially notified the Speaker of the National Assembly, Thoko Didiza, of his decision to withdraw the plan.
Parliament will be asked to realign spending to avoid derailing South Africa’s fragile fiscal path.
In the statement, Treasury hinted that plans to support low-income earners—initially part of the hike’s offsetting measures—will now be scrapped too.
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“The decision not to increase VAT means that the measures to cushion lower-income households against the potential negative impact of the rate increase now need to be withdrawn and other expenditure decisions revisited.”
A revised budget, minus the VAT bump, will be tabled soon.
The now-scrapped VAT increase was initially pitched as a way to restore funding to critical frontline services like health, education, and policing—areas that have seen brutal budget cuts in recent years.
While it’s a win for consumers at the tills, the question now is: will the revised budget bring real solutions, or just kick the can further down the road?
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