Another bleak year for consumers as Finance Minister confirms there are no other alternatives but to implement a VAT hike from next month.
Image: Jairus Mmutle / GCIS
Value Added Tax (VAT) will increase by May 1. This is according to Finance Minister Enoch Godogwana.
Responding to court action undertaken by the Economic Freedom Fighters (EFF) and Democratic Alliance (DA), Godogwana noted that failing to raise VAT next month could cause severe harm to state finances.
He said the consequences would be severe and far-reaching.
"Government would be immediately forced either to cut expenditure or increase borrowing," he said.
As per Godogwana's affidavit, the first 0.5 percentage point will increase from May 1, 2025 while the second 0.5 percentage point taking effect from April 1, 2026.
"In making this decision, the government carefully considered the potential contributions of each of the main tax instruments. VAT is an efficient source of revenue. It is broad based, and its design is simple with minimal exceptions.
"Moreover, South Africa's VAT rate is still relatively low compared with peer countries," he said.
Godogwana has further accused the DA of misreading the VAT Act.
Addressing media at an oversight visit in the Eastern Cape this week, the minister said he "was not married to any percentages or any increase."
Earlier this month, the DA, a major player in the Government of National Unity, filed court papers in the Western High Court to challenge the legality of the 2025/26 National Budget process.
DA federal chairperson says the decision to hike VAT is unjust and will severely impact those already facing financial difficulties, which is why the DA is challenging it in court.
Image: Armand Hough/Independent Newspapers
The party said its court challenge rests on two key grounds:
- Challenging the procedure of the Finance Committee on April 1 to consider and approve the Fiscal Framework
- Challenging the constitutionality of certain revenue collection and expenditure measures becoming binding through a speech by the Finance Minister without Parliament having to consider, oversee or approve them.
Part one of the DA's challenge is set to be heard in court on April 22.
The VAT factor has been yet another bone of contention between the African National Congress and its alliance partner, threatening once more to break up the Government of National Unity (GNU).
The FW de Klerk Foundation advised DA to remain in the GNU as the party's Federal Executive met to discuss the fallout from the budget, economic reform, VAT increases and the party's position in the GNU.
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