Godongwana cuts zero-rated food basket in Budget 3.0
Finance Minister Enoch Godongwana on Wednesday announced that the zero-rated food basket will no longer be expanded.
The minister made the announcement while delivering the third budget speech in Cape Town.
Scrapping the expansion of the zero-rated food basket follows the decision not to implement a 0.5% increase in the value-added tax (VAT) this year and next.
ALSO READ: Godongwana cuts government spending to offset VAT shortfall
Food basket expansion
In the second budget speech delivered on 12 March 2025, he announced that the zero-rated food basket would be expanded. This was done to alleviate pressure on already struggling South Africans.
The list included edible offal from sheep, poultry, goats, swine, and bovine animals; specific cuts such as heads, feet, bones, and tongues; dairy liquid blends; and tinned or canned vegetables.
However, in the third budget speech, he stated that this expansion would fall away. 'As a result, the expansion of the zero-rated basket, which was included to cushion poorer households from the VAT rate increase, falls away.'
The zero-rated food basket.
New tax measures needed
While delivering the budget, he added that they need to propose new tax measures, aimed at raising R20 billion.
'We have allocated an additional R7.5 billion over the Medium-Term Expenditure Framework (MTEF) to increase the effectiveness of the South African Revenue Service (Sars) in collecting more revenue.
'Part of this allocation will be used to increase collections from debts owed to the fiscus.'
Godongwana said the taxman has indicated that this could raise between R20 billion to R50 billion in additional revenue per year.
ALSO READ: Budget 3.0: First fuel levy increase in three years – Here's by how much
Sars welcomes revenue collection estimations
Meanwhile, Sars Commissioner, Edward Kieswetter, welcomed the revenue collection estimate of R1.986 trillion for the 2025/2026 financial year, as announced by Godongwana.
'This revenue estimate comes against the backdrop of Sars' final unaudited revenue outcome for 2024/25, which is R1.86 trillion, R8.9 billion more than the revised estimate.'
He noted that, given the current tough domestic and global economic conditions, the R1.986 trillion revenue estimate is a challenging estimate.
'The estimate announced by the minister imposes the responsibility on Sars to implement revenue-raising initiatives.
'Debt collection is one such. Therefore, Sars will specifically accelerate work on collecting all debt, with a specific focus on undisputed debt. Sars acknowledges South Africa's economic difficulties and the effect that this will have on the aggregate amount of debt collected.'
Tax bracket creep
In this budget speech, Godongwana once again did not adjust personal income tax brackets for inflation, which is expected to generate an additional R15.5 billion in revenue in the 2025/26 fiscal year.
By not adjusting tax brackets to keep pace with inflation, the government allows a phenomenon known as 'bracket creep' to occur.
This occurs when people receive small raises due to inflation, but those raises cause them to be pushed into higher tax brackets. As a result, they might end up with less money in their pockets each month, even though tax rates have not changed.
The table below illustrates how the planned tax changes in the 2025 Budget will impact government revenue over the next three years.
NOW READ: Budget 3.0: not austerity budget, but a redistributive budget
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