South Africa reverse controversial VAT increment - wat next?

BBC News

24-04-2025

South Africa don reverse dia controversial proposed value added tax increase just days bifor e suppose take effect.
Dis VAT increase wey South Africa Finance Minister Enoch Godongwana announce for March 2025 during di budget speech cause serious political battle between parties for di coalition govment.
Plenti South Africans no support di announcement of di VAT increase - dem tok say e go add to di hardship wey dem dey face.
Di proposed VAT increase na to add 0.5 percent by 1 May 2025 den followed by anoda 0.5 percent increase by 1 April 2025.
But now, di Finance Minister for South Africa don announce di cancellation of di proposed VAT, in a statement dated 24 April 2025.
According to di finance minister, e say oda tax increases or public spending cuts fit follow.
"Di Minister of Finance go shortly introduce di Rates and Monetary Amounts and di Amendment of Revenue Laws Bill (Rates Bill) wey dey propose to maintain di Value-Added Tax (VAT) rate at 15 per cent from 1 May 2025, instead of di proposed increase to VAT wey dey announced in di Budget for March," di statement tok.
Di reversal of di VAT hike go likely welcome news for many South Africans, most of dem dey alreadi burdened by di rising cost of living.
Finance Minister Godongwana bin dey advocate for di VAT increase from 15 to 15.5 percent, wey e argue say e go help di most vulnerable citizens from di effects of oda tax measures.
Di Finance ministry warn say di effect of dis new move fit mean a revenue shortfall of about R75 billion (roughly $400 million) ova di medium term.
How di VAT increase take come
On Wednesday 12 March 2025, Minister Godongwana deliver di 2025 Budget Speech for di National Assembly temporary Chamber in di presence of di parliament members wey dey made up of opposition parties as well as President Cyril Ramaphosa wia e announce increase in VAT, infrastructure spending among oda economic issues.
Godongwana bin outline all di financial, economic and social commitments wey di govment want for im expenditure as well as govment spending and proposals for revenue collection wey govment wan use fund di economy.
Bifor today speech presentation, dem bin don postpone di presentation two weeks bifor, sake of complain ova di proposed VAT increment.
According to di budget speech presentation by di finance minister, govment go increase VAT by half-a-percentage point for di first year and anoda increase go happen for di following year.
Di VAT go increase by 0.5% from 1 May 2025 den followed by anoda 0.5% on 1 April 2026.
"To raise di revenue needed, di govment don propose to increase di VAT rate by half- a- percentage point for 2025/2026, and by anoda half-a-percentage point for di following year.
"Dis go bring di VAT rate to 16 per cent for 2026/27."
Wen di finance minister announce dis, noise bin start for di parliament as some members disagree and di minister get to explain imsef more.
Na di speaker later try calm di situation bifor dem allow am to continue to read im speech.
According to Minister Godongwana, e say to borrow or additional debts no go dey affordable for di South Africa economy and na VAT wey affect everybody, na im be di effective way to fit fund di spendings of di govment.
Why di VAT reversal
According to di statement from di Finance Ministry in South Africa, di decision to reverse di VAT increase na afta consultations wit political parties and parliamentary committees.
Di statement add say, di Minister of Finance don write to di Speaker of South Africa National Assembly say e wan withdraw di Appropriation Bill and the Division of Revenue Bill.
"Di decision to let dis increase go follow extensive consultations wit political parties, and careful consideration of di recommendations of di parliamentary committees.
"By not increasing VAT, estimated revenue go fall short by around R75 billion ova di medium-term.
Di ministry add say di Parliament go gatz adjust expenditure so dat revenue losses no go harm South Africa economy.
Sake of di VAT reversal, di ministry say expenditure adjustments fit lead to additional revenue and di Minister of Finance go introduce a revised version of di Appropriation Bill and Division of Revenue Bill within di next few weeks.
"Di decision not to increase VAT means say di measures to help lower income households against di potential negative impact of di rate increase now need to dey withdrawn and oda expenditure decisions go dey revisited."
Dem say di VAT reversal go affect oda revenue but dem go find ways to replace di VAT increase and dem go do oda proposals as potential amendments for upcoming budgets.
How parties dey react?
Di Economic Freedom Fighters (EFF) wey be one of di political parties for South Africa wey dey against di VAT increase say dem welcome di decision to reverse di VAT rate.
Howeva, di party say make di Finance Minister resign sake of how di budget don threaten di economic stability for di kontri.
"Di EFF call for di immediate resignation of di Minister of Finance and di Director General of di National Treasury."
Dis entire budget drama na reflection for di Minister of Finance and im Director General say dem dey out of depth and pose a threat to di economic stability of di kontri and by consequence, na threat to di livelihoods of South Africans," EFF tok for dia statement.
Di Congress of di People (COPE) party also say di reversal of 'ill-conceived VAT increase' dey welcomed.
Dem add say dis reversal "expose either gross incompetence or a deliberate abuse of power by di Minister of Finance."
Also, ActionSA party say di VAT reversal na 'victory' for South Africa dem go make sure say no unnecessary tax hike take place for di kontri.
"We say NO VAT increase go dey, and we deliva on our promise. As ActionSA, we go kontinue to dey fight to ensure say South Africans dey protected from unnecessary tax hikes".