South Africa's VAT Proposal Halted Amid Political Pushback

South Africa will not raise its VAT as stated in the 2025 budget due to political opposition. The decision means an estimated revenue shortfall of 75 billion rand. Adjustments to the Appropriation and Division of Revenue Bills are expected from Finance Minister Enoch Godongwana.

South Africa's finance ministry announced it will not proceed with the planned value-added tax (VAT) increase from May 1 as initially outlined in the 2025 budget. The decision comes after political opposition rose against the proposed tax hike.

The National Treasury originally aimed to increase VAT by one percentage point over two years, maintaining the current rate at 15%. Finance Minister Enoch Godongwana is expected to revise the Appropriation Bill and Division of Revenue Bill to reflect these changes in the coming weeks.

As a result of not increasing VAT, the ministry anticipates a revenue shortfall of approximately 75 billion rand ($4.02 billion) over the medium term. Parliament is set to adjust expenditures to preserve the country's fiscal sustainability. The VAT increase proposal faced legal challenges due to disagreements within the coalition government, particularly between the African National Congress and the Democratic Alliance.

(With inputs from agencies.)