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IOL News
02-05-2025
- Business
- IOL News
Impact of VAT increase suspension on local government budgets
Parliament's Settlement on VAT Hike: Implications for Municipal Budgets Image: Armand Hough / Independent Newspapers Following the scrapping of the planned 0.5% increase in Value-Added Tax (VAT), initially scheduled to come into effect on May 1, 2025, several previously approved municipal budgets have also been set aside, further complicating local government financial planning. This suspension means that not only is the national budget process delayed, but local government budgets—previously approved and scheduled for implementation—are also temporarily on hold, affecting service delivery and development projects at the municipal level. The ripple effects underscore the broader economic and administrative uncertainty created by the legal and political developments surrounding the VAT hike. On April 27, 2025, Parliament entered into an out-of-court settlement concerning the contentious VAT hike and the broader 2025 Fiscal Framework. The settlement, sanctioned by the Cape High Court, suspends the implementation of VAT increases and sets aside the resolutions adopted by Parliament's two Houses—the National Assembly and the National Council of Provinces—regarding the Fiscal Framework. This means that the original Appropriation Bill, which details government spending and allocates funds to various departments, has been withdrawn and is no longer before Parliament. As a result, Parliament said the scheduled budget votes—crucial steps in the legislative process, are currently on hold. It also stated that municipal budgets, already approved for the current financial year, are being set aside. What Happens Next? Parliamentary spokesperson Moloto Mothapo explained that a new Appropriation Bill and revised budget instruments must be drafted and introduced through the upcoming Budget Speech. Once these are tabled, the legislative Houses must reschedule their review and approval processes. 'A new Appropriation Bill and revised budget instruments will need to be introduced, after which the budget votes will be scheduled afresh by the legislative framework and parliamentary procedures,' Mothapo stated. He emphasised that the National Assembly and the National Council of Provinces must review and restructure their programs accordingly. The respective Programme Committees will set new timelines to ensure that all legislative steps are completed efficiently and that the budget is passed within the legally prescribed timeframes, in line with the Money Bills and Related Matters Act, 2009.
IOL News
29-04-2025
- Business
- IOL News
Parliament confirms VAT increase suspended, new budget to be tabled by Finance Minister
Parliament confirms the suspension of the VAT increase following a court-endorsed settlement. A new budget will be tabled soon by Minister of Finance Enoch Godongwana, with legal certainty and fiscal stability prioritised. Image: File Parliament has confirmed that the planned Value Added Tax (VAT) increase, announced earlier this month, will no longer proceed. This follows an out-of-court settlement reached on Sunday, April 27, 2025, which was made an order of the Western Cape High Court. The agreement suspends the VAT increase and sets aside the 2025 Fiscal Framework, clearing the way for Finance Minister Enoch Godongwana to present a new National Budget. Parliamentary spokesperson Moloto Mothapo said the resolution demonstrates South Africa's commitment to legal certainty and constitutional governance. 'By avoiding prolonged litigation, Parliament has helped ensure legal certainty, fiscal stability, and the continued delivery of essential public services,' said Mothapo. The court order halts the VAT hikes previously scheduled to begin on May 1, 2025. These increases are now suspended until new legislation is passed or a final court decision is made. Additionally, resolutions adopted by both Houses on April 2 approving the 2025 Fiscal Framework have been formally set aside. Although the matter was resolved through an out-of-court agreement, it was made legally binding by the court to prevent the VAT increase from taking effect automatically due to legislative time constraints. 'The court order thus ensured legal certainty and prevented the previously announced VAT increase from automatically taking effect on 1 May,' Parliament explained. The issue arose when the Democratic Alliance (DA) and the Economic Freedom Fighters (EFF) challenged the VAT hike. The Finance Minister subsequently withdrew his opposition, opening the door for a negotiated resolution. While the settlement was voluntary, it includes a costs order, said Parliament. 'The inclusion of a costs order was a necessary component of securing the settlement,' Parliament said, clarifying that it was not punitive but intended to cover substantial legal expenses incurred.
