{"id":813036,"date":"2025-02-19T16:10:54","date_gmt":"2025-02-19T14:10:54","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=813036"},"modified":"2025-02-19T16:14:36","modified_gmt":"2025-02-19T14:14:36","slug":"south-africas-plan-to-hike-vat-to-17","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/budget-speech\/813036\/south-africas-plan-to-hike-vat-to-17\/","title":{"rendered":"South Africa’s plan to hike VAT to 17%"},"content":{"rendered":"\n

National Treasury’s plan to increase the Value-Added Tax in South Africa has been thwarted. <\/p>\n\n\n\n

In an unprecedented move that shocked markets on Wednesday, cabinet cancelled the scheduled 2025 budget speech and postponed it to 12 March.<\/p>\n\n\n\n

The main driving force behind the cancellation is a big fight within the Government of National Unity (GNU) over proposed tax changes within the budget.<\/p>\n\n\n\n

Specifically, a proposal to hike VAT by two percentage points drew wide criticism.<\/p>\n\n\n\n

According to a document from the South African Revenue Service’s (SARS) website over the proposed tax changes, the treasury outlined its plan to increase VAT from 15% to 17%.<\/p>\n\n\n\n

This would have taken effect from 1 April 2025. <\/p>\n\n\n\n

In response, the zero-rating of certain goods would have been extended to include edible offal, unflavoured dairy liquid blends and specific canned and bottled vegetables to assist poor households. <\/p>\n\n\n\n

Zero-rated VAT products are exempt from VAT and currently include a host of other foods, products under the general fuel levy and more.<\/p>\n\n\n\n

The Democratic Alliance said it would have refused to approve the budget with the increase in VAT.<\/p>\n\n\n\n

DA chief whip George Michalakis said at the sitting that the government is no longer a majority-run entity that will rubber-stamp bad policies.<\/p>\n\n\n\n

Following the cancellation, the DA leadership took credit for “defeating” the move. However, at a post-cancellation briefing, minister in the presidency Khumbudzo Ntshavheni said that the decision to cancel the sitting was a cabinet decision across party lines.<\/p>\n\n\n\n

The move to cancel the sitting shocked markets, and the VAT proposal was widely unexpected by tax experts in South Africa.<\/p>\n\n\n\n

Many stated ahead of the budget speech that a VAT increase would be highly unlikely, given that these hikes often hit the poorest the most in the country, even if it is seen as a way to increase the state’s coffers.<\/p>\n\n\n\n

The increase in VAT comes amid reports that the government plans to squeeze more of taxpayers to fund a projected R300 billion shortfall. <\/p>\n\n\n\n

Despite this, speaking at a media roundtable, tax experts at Deloitte predicted that the National Treasury would keep VAT at 15%. <\/p>\n\n\n\n

Ania Strydom from PaySpace also did not see an increase in VAT occurring. She noted that it took considerable pressure to increase VAT to 15% in 2018. <\/p>\n\n\n\n

Even with South Africa’s coffers strained, Strydom said that current fiscal pressures were unlikely to motivate another VAT increase.<\/p>\n\n\n\n

Not everything was a surprise <\/strong><\/h2>\n\n\n
\n
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President Cyril Ramaphosa and Finance Minister Enoch Godongwana<\/figcaption><\/figure><\/div>\n\n\n

Unlike the increase in VAT, most experts did expect the number of zero-rated goods to be increased.<\/p>\n\n\n\n

Zero-rated goods are exempt from VAT and include 19 basic food items, such as brown bread, maize meal, samp, and mealie rice. <\/p>\n\n\n\n

Calls to increase the list of zero-rated goods are seen as a way to allow greater relief to already financially strained lower- and middle-class consumers.<\/p>\n\n\n\n

President Cyril Ramaphosa and other ANC members previously called for an increase in the number of zero-rated increases. <\/p>\n\n\n\n

However, Deputy Finance Minister David Masondo, who works with the National Treasury, previously said that a serious change in the zero-rated list was unlikely. <\/p>\n\n\n\n

Masondo said that existing items on the list were well-targeting, adding that increasing the list of zero-rated goods would lead to VAT revenue loss for the state. <\/p>\n\n\n\n

However, this was before the state planned to hike VAT to make up for this.<\/p>\n","protected":false},"excerpt":{"rendered":"

A leaked document from SARS lays bare the government’s now-thwarted plan to hike VAT to 17% in South Africa.<\/p>\n","protected":false},"author":95,"featured_media":812935,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13716],"tags":[3796,3246],"class_list":["post-813036","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budget-speech","tag-national-treasury","tag-sars"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/813036","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=813036"}],"version-history":[{"count":7,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/813036\/revisions"}],"predecessor-version":[{"id":813129,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/813036\/revisions\/813129"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/812935"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=813036"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=813036"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=813036"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}