19 February 2025 will forever be a date to remember in SA – this is when the Government of National Unity (GNU) flexed its muscles and, for the first time in our history, the Budget Speech was postponed.
In doing so an unprecedented 2% VAT hike was averted and much-needed public and political participation ensued. Enoch Godongwana, Minister of Finance, made his view clear that Treasury is to determine tax policy whilst SARS should stay its course and focus on tax administration and the collection of taxes. This was after Edward Kieswetter, Commissioner of SARS, stated his view (prior to 19 February 2025) that a VAT increase is not the answer, but rather investment in SARS to bolster its capabilities to collect taxes.
On 12 March 2025 the Budget was tabled. A 0.5% VAT increase was announced with effect from 1 May 2025, with an additional 0.5% VAT increase with effect from 1 April 2026. A comparison of VAT rates was given to justify the lesser hike. On that point, one cannot look at the VAT rate of different countries in isolation, but we need to consider how each country’s citizens benefit from a higher VAT rate. In additional, some countries have a much lower personal tax rate and its entire tax policy moved towards consumption taxes as an easier method to collect taxes.
Importantly the Budget is yet to be accepted by the GNU. John Steenhuisen posted prior to the Budget Speech: “Good afternoon, South Africa. The DA will not support the budget in its current form”. So, what now?
Parliamentary committees will now discuss budget points relevant to its portfolios, and then the GNU returns to the National Assembly for a vote. Within the GNU, the ANC requires a majority vote to pass the Budget and needs at least 42 other MPs to vote with it. Either the DA, or alternatively the EFF and MK, are the obvious combinations together with the ANC to get to a majority vote, but it is unlikely as things now stand that the ANC will get support from either party.
What is important to note is that SARS has been allocated an additional R7.5 billion funding over the next three years to target the reduction of tax debt and to modernise its systems. R4 billion will be allocated to limit tax debts and stimulate quicker turnaround times for declarations that require refunds. R500 million will be spent per year over the next three years to modernise its systems, and R1 billion will be allocated for “operationalisation”.
Parliament can, thankfully, still amend the Budget in terms of the Money Bills Amendment Procedure and Related Matters Act based on parliamentary committee discussions.
Now is the time for the wise to speak and also to listen, it is time for workable solutions and it is time for political egos to be put aside in the interest of all South Africans.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)