[Image: Treasury.gov]
Finance Minister Enoch Godongwana has pushed ahead with ‘the difficult decision’ to propose a VAT hike in his reworked 2025 Budget Speech delivered yesterday (Wednesday).
Although the VAT hike was significantly lower than the 2% planned in February, almost all of the opposition parties have balked at the idea, likely leading to more legal tussles between the ANC and DA.
Godongwana tabled a proposal to gradually increase South Africa’s VAT rate by 0.5% in 2025/26, and then another 0.5% in 2026/27. Government is turning the heat up slowly, but the hand that taketh away explained that there would be several relief measures being tabled to mitigate some of the damage.
“To provide relief to lower-income households, the government proposes additional VAT zero-rating of essential food items and no changes to the fuel levy.”
There was no major announcement about funding the controversial National Health Insurance (NHI) or any mention of a wealth tax. However, the middle class looks set to be the most impacted by the VAT hike and tax bracket creep.
“As much as the debate has been dominated by the proposed increase to value-added tax (VAT), the bigger debate must be about how we grow the economy for the benefit of the majority.”
South Africans don’t like to be touched on their vices, but sin taxes have increased above inflation, meaning weekends will become even more expensive. Along with just about everything else.
How bad is it? Read all about it in yesterday’s full 2025 Budget Speech here.
[Source: Moneyweb]
