2024042401 Media Statement on the Reversal of the Vat Rate Increase
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Palesa Dlamini2024042401 Media Statement on the Reversal of the Vat Rate Increase
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Palesa Dlamini1 of 2
MEDIA STATEMENT ON REVERSAL OF
VAT INCREASE
The Minister of Finance will shortly introduce the Rates and Monetary Amounts and the
Amendment of Revenue Laws Bill (Rates Bill), which proposes to maintain the Value-Added
Tax (VAT) rate at 15 per cent from 1 May 2025, instead of the proposed increase to VAT
announced in the Budget in March.
The decision to forgo the increase follows extensive consultations with political parties, and
careful consideration of the recommendations of the parliamentary committees. By not
increasing VAT, estimated revenue will fall short by around R75 billion over the medium-
term.
As a result, the Minister of Finance has written to the Speaker of the National Assembly to
indicate that he is withdrawing the Appropriation Bill and the Division of Revenue Bill, in
order to propose expenditure adjustments to cover this shortfall in revenue. Parliament will
be requested to adjust expenditure in a manner that ensures that the loss of revenue does
not harm South Africa’s fiscal sustainability.
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withdrawn and other expenditure decisions revisited. To offset the unavoidable expenditure
adjustments, any additional revenue collected by SARS may be considered for this purpose
going forward.
The Minister of Finance expects to introduce a revised version of the Appropriation Bill and
Division of Revenue Bill within the next few weeks.
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The initial proposal for an increase to the VAT rate was motivated by the urgent need to
restore and replenish the funding of critical frontline services that had suffered reductions
necessitated by the country’s constrained fiscal position.
There are many suggestions, however some of them would create greater negative
consequences for growth and employment and some of them, while worthwhile, would not
provide an immediate avenue for further revenue in the short term to replace a VAT increase.
The National Treasury will, however, consider these and other proposals as potential
amendments in upcoming budgets as mechanisms to increase the resources available.
