Budget in a nutshell

Godongwana: Finance Minister Tables 0.5 Percentage Point VAT Hike

- Suren Naidoo

Finance Minister Enoch Godongwana bit the bullet, pushing ahead with "the difficult decision" to propose a value-added-tax (VAT) tax hike in his reworked 2025 budget speech on Wednesday, albeit lower than the hike he planned in February.

Godongwana tabled a proposal to increase the VAT rate by 0.5 percentage points in 2025-26 and by a further 0.5 percentage points in 2026-27. The move is likely to spark a showdown in parliament between the ANC and DA – the two main parties in the government of national unity (GNU).

Cabinet had not approved the latest budget ahead of Godongwana's speech.

The DA and other parties have been vehemently against any VAT hike, with the DA also against other major tax increases, such as a wealth tax.

A heated dispute over VAT hikes in the GNU Cabinet means a decision on the new proposal will need to be debated and voted for in parliament, with the ANC hoping to secure support from other parties.

Godongwana and National Treasury's proposal to hike VAT by an effective 1 percentage point over the next two years, if approved, will take SA's VAT rate to 16% by April 2026.