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Eyewitness News
30-04-2025
- Business
- Eyewitness News
South Africans shaped VAT reversal: 'When people speak, we must listen'
CAPE TOWN - The value-added tax (VAT) reversal decision was shaped by South Africans and not just political debate. This is according to Finance Minister Enoch Godongwana. The minister says he was also encouraged by the passion shown by South Africans who've been engaged with the developments leading up to the decision to reverse the 0.5% VAT increase. He addressed the media on Wednesday, where he shed light that he would table a revised budget on 21 May 2025. ALSO READ: Treasury's options to make up for revenue shortfall not straightforward: IEJ "Today [Wednesday], there's clarity, VAT will remain at 15%. This decision was shaped not only by political debates but, importantly, by the voices of South Africans. When people speak, we must also listen." He also admits that the discussions with other parties over the last few months were far from easy. "Because of the nature of coalition politics, we couldn't find consensus both in Cabinet, and in the Legislature. I'm not going to put blame on anybody, but that process on its own, because all of us are new in this thing was messy."
TimesLIVE
24-04-2025
- Business
- TimesLIVE
IEJ welcomes government's decision to reverse 'regressive' VAT hike
The Institute for Economic Justice (IEJ) has welcomed the decision to reverse the VAT hike, which it says is a regressive tax that would have disproportionately harmed the poor, low-income workers and the struggling middle class. 'We caution that this reversal should not open the door for budget cuts as appears to be the National Treasury's preference.' It said while begrudgingly conceding on the issue of the VAT hike, the National Treasury and finance minister Enoch Godongwana appeared to double down on their ideological rejection of progressive revenue alternatives. 'This flies in the face of evidence presented in parliament by the IEJ and other civil society organisations, as well as by political parties, which show that many alternatives are readily available.' The IEJ said the 0.5 percentage point VAT increase, at best, would have secured R13.5bn in revenue, which was a tiny 0.5% of the national budget. 'It has recently emerged that the revenue overrun collected by Sars (of about R9bn) alone, without further revenue or budget cuts, largely fills this hole. 'It also highlights the failure by the National Treasury to find innovative ways to raise revenue that can immediately unlock resources to further finance essential services and expand public investment,' the IEJ said. The organisation said there were a number of immediate sources of revenue. These included: ● Tapping into the Gold and Foreign Exchange Reserve Account (GFECRA), which still has over R300bn available to the government; ● Removing tax breaks for high-income earners (those earning above R1m per year), such as those linked to pensions or medical aid contributions. The government spent about R51bn on these in 2022/23; and ● Raising the corporate income tax rate back to 28%, as the previous reduction to 27% failed to attract investment. This would have raised an extra R12bn in 2024/25. The IEJ said that over the medium term, other measures, including a wealth tax, social security tax, and financial transactions tax, are available that could generate significant revenue and reduce inequality.
Eyewitness News
24-04-2025
- Business
- Eyewitness News
Treasury's options to make up for revenue shortfall not straightforward: IEJ
JOHANNESBURG - The Institute for Economic Justice (IEJ) says the options on the table for the National Treasury to make up the expected revenue shortfall are not cut and dried. Minister of Finance Enoch Godongwana has made a 180-degree turn on the value-added tax (VAT) hike proposed in the 2025 budget, following a collective pushback from political parties and civil groups. This means the VAT standard rate will remain at 15%. ALSO READ: The scrapping of the 0.5% VAT increase is expected to result in a R75 billion revenue shortfall. Already battling a high debt burden, the government has previously been warned to avoid raising more debt. Other than raising debt, other alternatives that have been touted by various analysts include lowering expenditure or again dipping into the Gold and Foreign Exchange Contingency Reserve Account (GFECRA). The tax and budget policy researcher at the IEJ, Zimbali Mncube, said reversing tax rebates could also go a long way. 'If they could be reversed, government could also raise revenue very easily and the R75 billion would be covered by that or reversing those repeats. 'I wouldn't say it's even loans or cutting expenditure, it's also about considering every alternative that the government has at its disposal, and we are saying it's time that these are considered.' The National Treasury is set to consider these and other proposals as potential amendments in upcoming budgets, as mechanisms to increase the resources available.
