Category: News Flash | LOW-INCOME HOUSEHOLDS NON-PROFIT ORGANISATIONS PUBLIC SERVICE PROVIDERS RETAILERS SMALL BUSINESSES VAT Increase WITHDRAWN INDIVIDUALS
NEWSFLASH | VAT INCREASE WITHDRAWN: WHAT THIS MEANS FOR YOU
In March 2025, the South African government announced a proposed increase in the Value-Added Tax (VAT) rate — a decision that immediately sparked public debate. The increase was positioned as necessary to support critical services and improve the country’s strained fiscal position.
But as of 24 April 2025, this VAT hike has officially been withdrawn.
The revised decision, announced by the Ministry of Finance, confirms that the VAT rate will remain at 15% from 1 May 2025, instead of increasing as previously stated. This change has far-reaching implications for households, businesses, and national expenditure priorities.
WHY WAS THE VAT INCREASE WITHDRAWN
After extensive discussions with political parties and a thorough review of feedback from parliamentary committees, it became clear that the proposed VAT increase would not be sustainable — especially for low-income households and the broader economy. Instead of increasing the tax burden, government opted for a different course of action:
- The VAT increase is rescinded.
- Government now faces a revenue shortfall of approximately R75 billion over the medium term.
- To accommodate this, expenditure will be restructured and revised, avoiding harm to fiscal sustainability.
LEGISLATIVE & FISCAL SIDEBAR
The Amendment of Revenue Laws Bil and the Appropriation Bill are undergoing substantial revisions. The Ministry is working swiftly to introduce a revised set of bills that better reflect South Africa’s current fiscal strategy without the projected VAT uplift. Additional compliance andcollection efforts by SARS may offer relief in absorbing the projected shortfall.
COMPARING THE PROPOSAL VS. FINAL POSITION
| Item | Initial VAT Proposal | Revised VAT Plan (24 April 2025) |
|---|---|---|
| VAT Rate (effective 1 May 2025) | 16% or higher | 15% |
| Expected Additional Revenue | R75 billion | R0 (shortfall created) |
| Mitigation for Low-Income Households | Planned | Withdrawn |
| Impact on Goods/Services Pricing | Higher | Stable |
| Legislative Response | Appropriation & Revenue Bills | Withdrawn & Revised |
| Future Revenue Strategy | VAT-centred | SARS collections + budget reallocations |
WHO BENEFITS FROM THIS DECISION?
This decision is significant for several groups:
- INDIVIDUALS AND LOW-INCOME HOUSEHOLDS: Avoid increased living costs.
- SMALL BUSINESSES AND RETAILERS: Maintain current pricing strategies.
- NON-PROFIT ORGANISATIONS AND PUBLIC SERVICE PROVIDERS: Continue service delivery without higher operating taxes.
With the rate remaining at 15%, existing budgets can continue without additional strain.
TRADE-OFFS AND NEXT STEPS
There’s no easy solution to plugging a R75 billion hole in the budget. But the Ministry is focused on responsible fiscal management:
- Additional revenue collected by SARS may be used to help manage the funding gap.
- All previous measures intended to soften the blow of a VAT hike for the poor have now been cancelled.
- Spending decisions across departments are being carefully revisited.
Over the next few weeks, the Rates and Monetary Amounts and Amendment of Revenue Laws Bill (Rates Bill) will be introduced in Parliament. This bill will formally confirm that the VAT rate remains unchanged.
WHAT SHOULD YOU DO NOW?
To stay informed and ready:
- REVIEW YOUR 2025 BUDGETS: No change to VAT-inclusive pricing — but assess revenue streams.
- TRACK UPDATES TO THE APPROPRIATION BILL AND DIVISION OF REVENUE BILL: Expect realignment of public sector spending.
- REMAIN VIGILANT FOR UPDATES FROM TREASURY AND SARS: Additional fiscal tools may be used soon.
The decision to reverse the VAT increase sends a clear signal: government is listening, and it's willing to make tough fiscal choices without adding to the financial burden of ordinary citizens.
DISCLAIMER
Nothing in this article and/or post should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure accuracy, Tax A Sured (Pty) Ltd does not accept any responsibility for consequences of decisions taken based on this article and/or post. It remains your own responsibility to consult the relevant primary resources when taking a decision.
