No VAT increase for South Africa needed

Renowned economist Dawie Roodt said the state collected nearly R10 billion more in taxes than expected, which means it does not need to increase value-added tax (VAT).

Roodt shared this information during a Biznews interview about the current battle regarding the planned 0.5 percentage point VAT increase.

On Tuesday, South Africa’s High Court heard an application filed by the DA and EFF that seeks to stop a proposed VAT hike.

The court reserved judgment in the lawsuit to interdict the authorities from raising VAT by half a percentage point from 1 May 2025. It expects to deliver its ruling by 29 April 2025.

“We oppose a bullying budget that will lead to more young people losing hope when they realize they will be poorer than their parents,” DA finance spokesman Mark Burke said.

“We oppose a bleeding budget that will lead to more South Africans wondering why their house value has gone down for another year in a row.”

The battle raised investor uncertainty about the stability of South Africa’s government of national unity.

Finance Minister Enoch Godongwana said scrapping the VAT hike would leave a budget hole that would have to be filled by borrowing.

This, in turn, will sap fiscal discipline and impose a lasting cost on the country’s finances, and he sees no viable alternative.

However, Roodt disagrees. He said the South African Revenue Service (SARS) collected around R10 billion more than expected in the previous financial year.

On 1 April 2025, SARS announced a positive preliminary revenue-collection outcome for the 2024/25 fiscal year.

By the end of March 2025, SARS had collected a record gross amount of R2.303 trillion, representing a 6.9% year-on-year growth.

SARS paid refunds of R447.7 billion to taxpayers, which brought the collected net amount to R1.855 trillion.

This is almost R8.8 billion higher than the revised estimate, and R114.0 billion more than last year’s R1.741 trillion.

“Half a percentage point increase will raise around R10 billion. That means the state has the money. We don’t need to increase VAT,” Roodt said.

“There was an overrun in the previous financial year, which is enough to prevent the planned VAT increase.”