South Africa Cancels VAT Increase After Public Outcry

Beulah Godfrey

April 24, 2025
2 min read

South Africa has canceled its plan to increase value-added tax (VAT) after facing strong opposition from political parties and civil society groups. The National Treasury had suggested a 1% VAT hike over two years to close a $4.02 billion (R75 billion) budget gap.

On Thursday, the National Treasury said it had decided after talking with top political parties and members of parliament. However, it warned that the government now faces tough budget cuts. These may include reducing or removing cash transfers to low-income families.

Many South Africans had already received warnings from service providers about price hikes starting on May 1. The planned VAT increase would have immediately raised the cost of living, especially for low-income households.

By canceling the tax hike, the government has relieved citizens. Still, the decision makes it harder to find funds for key public services like healthcare and education, which have suffered from years of underfunding.

“The VAT hike was meant to restore funding for critical frontline services cut due to our tight budget situation,” the Treasury explained.

Budget Bills Withdrawn for Adjustments

The Treasury had planned to raise VAT by 0.5% in May 2025 and another 0.5% in 2026. Some leaders from the ruling African National Congress and its partner, the Democratic Party, disagreed with the plan. They felt it would hurt ordinary citizens more than help the economy.

Finance Minister Enoch Godongwana officially pulled the budget bills from parliament. This move will allow the government to change the national budget and find new ways to manage the shortfall without raising VAT.

“There are many suggestions to solve the problem,” the Treasury said, “but some would hurt jobs and growth, while others wouldn’t raise money fast enough.”

South Africa last raised VAT in 2018, during a time of financial crisis caused by mismanagement under former President Jacob Zuma. Since then, the tax has remained a sensitive topic.

Today, more than 30% of South Africans are unemployed, and inequality remains high. Although basic items are tax-free, many people still believe VAT unfairly affects poor families.