VAT remains at 15%; coalition withdraws two, 0.5% increases – May 2025 & April 2026 – to 16%
The South African government on 24 April withdrew the proposed 0.5% VAT rise to 15.5% due to go ahead on 1 May 2025. The rise was contained within the Parliament-approved Budget – but the Democratic Alliance minority partner had challenged this based on a lack of public consultation. New legislation will be brought forward to annul the rise.
According to a media statement published on 24 April, the government commented that the decision to forgo the increase followed “extensive consultations with political parties, and careful consideration of the recommendations of the parliamentary committees”.
The plan was for two rises in the next two financial years:
- 1 May 2025 rise from 15% to 15.5%; and
- 1 April 2026 rise from 15.5% to 16%
March budget had Parliament approval
Two weeks ago, media was reporting that the ANC-led coalition government was likely to abandon the two VAT increases to take the standard rate from 15% to 16%. Aside form local political disagreements, the ANC and Democratic Alliance partner government was also concerned about the effects on inflation in light of the new US tariff raising plans.
In February, the publication of the budget was pulled at the last moment once it became clear that a 2% VAT rise to 17% would be unacceptable to the government coalition partners.
The increase would be to fill a budget shortfall of R22.3 billion and to help fund:
- Fund public sector wage increases
- Expand early childhood development
- Retain teachers, doctors, and frontline workers
- Revitalize commuter rail for working-class families
- Provide above-inflation social grants
In recent years, tax revenues have been supported by income tax rises via non-indexing for inflation. But consumption and corporate taxes have been flat. In proposing to raise VAT, the government was looking to rebalance this drift.
South Africa’s 15% VAT is rate typical for the region:
- 15% Namibia
- 12% Botswana
- 15% Zimbabwe
- 16% Mozambique
