The National Treasury has officially reversed its decision to raise the VAT rate to 15.5%, following mounting political pressure and widespread public backlash.
In a statement released shortly after midnight on Thursday, Treasury confirmed that the VAT rate will remain at 15%, shelving the proposed increase that was set to take effect on 1 May 2025.
“The decision follows extensive consultation with political stakeholders and careful consideration of recommendations from the Parliamentary committees,” the statement read.
The proposed 0.5 percentage point hike sparked significant tension within the Government of National Unity (GNU), with both the Democratic Alliance (DA) and the Economic Freedom Fighters (EFF) challenging the move in court. Critics argued the increase would place an undue burden on low-income households already struggling with inflation and unemployment.
Mounting Political Pressure
Finance Minister Enoch Godongwana has faced growing criticism from coalition partners and civil society organisations since the VAT hike was first announced during the 2025 budget speech.
Sources within Parliament indicated that the DA and EFF were united in their opposition, branding the proposal as regressive and harmful to the poor. Their legal challenge, filed last week, argued that the increase lacked proper public consultation and would deepen inequality.
“This is a victory for working-class South Africans,” said a spokesperson for the EFF. “We cannot allow government policy to be driven by austerity measures that hurt the most vulnerable.”
The DA echoed these sentiments, with its parliamentary caucus calling the reversal “a necessary course correction.”
Economic and Political Implications
Analysts say the reversal could complicate fiscal planning, as Treasury had projected the additional VAT revenue to plug budget shortfalls and support debt reduction efforts.
However, others argue that the political cost of implementing the increase just months before a likely general election would have outweighed any short-term fiscal gain.
“Raising VAT is always controversial. Doing so in the current economic climate and political context was simply unsustainable,” said economist Lebogang Mabena.
Looking Ahead
Treasury has not ruled out alternative revenue measures to support government spending, but indicated that any future proposals would undergo broader public consultation and align with pro-poor fiscal policy.
For now, consumers can breathe a sigh of relief as the VAT rate remains unchanged at 15%—a move expected to bring short-term political stability within the fragile GNU coalition.
