‘CUT the fat’ and issue of Value Added Tax increase will be in the past.
Do away with the R350 grant and impose more VAT to the wealthy and organisations, are some of the suggestions following the scrapping of the 0.5 VAT increase.
After weeks of unsavoury talks behind the scenes, today we can confirm that Finance Minister Enoch Godogwana will scrap the VAT increase, in line with fiscal framework.
ANC, ActionSA and eight other parties in the Government of National Unity (GNU) will officially announce the VAT hike has been reversed.
The ANC has strategically excluded two GNU parties, the DA and the Freedom Front Plus (FF+), which opposed the budget.
Inkatha Freedom Party (IFP), Pan Africanist Congress (PAC), Rise Mzansi, BOSA, United Democratic Movement (UDM), Good Party, Al-Jamah and Patriotic Alliance (PA) will communicate the outcomes of their discussions to resolve the fiscal framework.
“These parties have come together to facilitate a principled resolution to the fiscal framework impasse and to uphold the stability and developmental trajectory of South Africa,” the ANC said.
Responding to this, ActionSA National Chairperson, Michael Beaumont, said the talks with the ANC are “so far, so good” and “ActionSA looks forward to participating in the report back on the long process started by MP Alan Beesley on April 1, 2025, to explore revenue alternatives to a VAT increase.”
BOSA also commended the joint effort to get VAT scrapped, saying this is a victory for citizens.
“When we voted in support of the fiscal framework, misinformation campaigns came at us fast and loud. But we didn’t waver.
“We didn’t run away to the courts. The VAT increase has been blocked. And this is a victory for all of us, the people of South Africa.
“Leadership is not about noise. It’s about making the responsible calls that deliver results,” it said.
The citizens are happy with the outcome of VAT no increase, and at the same time calling for the scrapping of R350 grant, downsizing of Parliamentarians and increase VAT on private companies, that is ‘cutting the fat’.
Media briefing will be held in Sandton, on Thursday morning, with the exception of DA and FF+.
However, government still has a revenue hole to fill, given that by not increasing VAT, estimated revenue will fall short by around R75 billion over the medium-term, National Treasury’s statement said.
“Parliament will be requested to adjust expenditure in a manner that ensures that the loss of revenue does not harm South Africa’s fiscal sustainability,” the statement said.
The proposed VAT hike of 0.5 percentage points was due to come into effect on May 1.
Earlier this week, the Democratic Alliance (DA) and Economic Freedom Fighters (EFF) took Godongwana and several other institutions, including the South African Revenue Service, to court to halt implementation. That ruling was expected to be handed down on April 29.
The DA on Tuesday, during a press conference, argued that the Minister was imposing a fiscal framework enabling voting on the National Budget containing the VAT increase without agreement between all parties. It wants the fiscal framework containing the VAT increase overturned.
In their filing, the DA and EFF argued that the adoption of this fiscal framework was “unlawful”.
This fiscal framework has caused confusion regarding the VAT increase as ActionSA has claimed to have halted the framework, and thus the Budget’s, implementation with National Treasury having 30 days from April 1 to come up with alternative proposals.
National Treasury said in its statement issued on Thursday morning that the Minister will shortly introduce the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill, which proposes to maintain the tax at its current level.
“The decision to forgo the increase follows extensive consultations with political parties, and careful consideration of the recommendations of the parliamentary committees.”
However, the Minister’s reversal means that other measures to cushion the poor against the proposed hike will have to be reversed. The latest National Budget, eventually tabled in March after it failed to be passed in February, proposed increasing the basket of zero-rated, or VAT-exempt, items to aid lower income households.
The Minister of Finance expects to introduce a revised version of the Appropriation Bill and Division of Revenue Bills within the next few weeks, in which it will propose that VAT will remain the same.
National Treasury stated that the initial proposal for an increase to the VAT rate was “motivated by the urgent need to restore and replenish the funding of critical frontline services that had suffered reductions necessitated by the country’s constrained fiscal position”.
The statement said the department would consider all potential proposals to increase revenue collection.
Image supplied (Cornered. Finance Minister Enoch Godongwana back-tracks on the VAT increase).
