WHAT VAT HIKE U-TURN MEANS FOR BUSINESSES

Minister to request Parliament to adjust expenditure in a manner that protects fiscal sustainability

- NICOLA DANIELS

ALL businesses who have loaded an increased VAT on customer invoices need to reverse it before May 1 following Finance Minister Enoch Godongwana's about turn on the 0.5% hike yesterday.

The decision to forgo the increase follows extensive consultations with political parties, and careful consideration of the recommendations of the parliamentary committees, said the National Treasury.

By not increasing VAT, Treasury added, would see an estimated revenue shortfall of around R75 billion over the medium-term. Finance Minister Enoch Godongwana said Parliament will be requested to adjust expenditure in a manner that ensures that the loss of revenue does not harm South Africa's fiscal sustainability.

The move comes amid fractured GNU relations over the issue. The DA had not voted with its coalition partner when the Fiscal Framework was tabled in Parliament after the ANC refused to concede to its demands, which included the privatisation of certain ports among others. The DA then decided to approach the courts when the ANC secured enough support from within and outside the GNU to have the budget containing a VAT increase, passed.

The sudden turn of events came as the Western Cape High Court was expected to deliver its outcome next week having heard arguments from the DA and the EFF on why Godongwana did not have powers to hike the VAT. Their application also challenged the process followed to have the Fiscal Framework adopted.