Finance Minister Enoch Godogwana, after immense pressure from political parties, has finally cowered and scrapped the proposed 0.5% increase in Value-Added Tax (VAT).
The decision comes after intense negotiations and pressure from various political parties, who argued that the increase would burden the poor and working class.
Godongwana has announced that the National Treasury would no longer be implementing the controversial 0.5 percentage points increase in the VAT from 1 May in a statement on Wednesday night.
Last month, the finance minister proposed to increase the VAT from 15% to 15.5% after his Budget Speech was postponed in February when he proposed to increase VAT by 2 percentage points.
The DA has claimed victory in getting the National Treasury to drop its intended 0.5 percentage point VAT increase.
According to reports, lawyers acting for Finance Minister Enoch Godongwana approached the DA’s lawyers, indicating that the VAT increase would not be pursued.
DA federal council chairperson, Helen Zille, said Godongwana should be “embarrassed” for buckling under pressure after fighting for the increase even in court.
Zille said ANC also deliberately deceived smaller parties when it said they would consider other alternatives, even when the VAT increase was already confirmed.
The DA has also indicated that they would be continuing with the legal action, heard on Tuesday, on the VAT matter despite it being scrapped.
However, the ANC has hit back at political parties claiming “victory” over the reversal of the VAT increase.
ANC spokesperson Mahlengi Bhengu-Motsiri, during a press conference, said the decision was not made under pressure but by Parliament itself.
“This outcome did not arise from experience, nor as a concession to pressure or coercion, but from a shared commitment across party lines that the working class, the poor, and all other people cannot be further burdened in this economic climate,” she said.
Action SA president Herman Mashaba said reversing this VAT increase was not achieved by the parties who were in court Tuesday.
“VAT reversal was achieved by political parties that were willing to put their differences aside and demonstrate the maturity required to find an alternative to a VAT increase,” Mashaba said.
Other political parties have also welcomed the decision to scrap the VAT increase. The EFF noted and welcomed the decision, saying the budget failed to appreciate the degree and depth of the economic crisis South Africa is confronted with.
“South Africans need jobs and economic growth urgently, and the state is the only institution with the capacity to respond,” said the EFF.
The Congress of South African Trade Unions (Cosatu) applauded the Minister for Finance’s announcement, saying it would provide relief to millions of workers struggling to cope with the rising costs of living.
“What is needed now is for a simple surgical adjustment of the budget’s expenditure allocations,” said Cosatu.
The Pan Africanist Congress of Azania (PAC) welcomed the outcome of extended and principled deliberations on the 2025 Fiscal Framework, saying it was a critical victory for the working class and poor.
“From the onset, the PAC firmly rejected any tax policy that burdens the poor,” said the party.
RISE Mzansi National Leader Songezo Zibi said the party takes positive note of the Finance Minister’s announcement, which begins the legislative process of keeping VAT at its current rate of 15%.
“This union of political parties with the aim of finding a solution means that the Finance Minister and Parliament are now free to proceed with the rest of the Budget process without being held hostage by narrow political priorities,” said Zibi.
The African Transformation Movement (ATM) warmly welcomed the decision, saying it was a significant victory for the party and the citizens of South Africa who stood firm against the hike.
Build One South Africa (Bosa) also welcomed the decision, saying it was a direct result of sustained pressure and principled advocacy.
Al Jama-Ah said the party had successfully turned the tide on the proposed VAT increase, securing a critical victory for the people of South Africa. “As a party committed to justice and equity, Al Jama-ah has consistently opposed oppressive taxation, including VAT, which disproportionately impacts the poor and working-class,” said the party.
Political analyst Sandile Swana said the VAT matter was a sideshow because tax matters in SA did not deserve to increase for the next 10 years.
“If you look at the fact that this VAT started at 4% in 1978, it is now at 15% and Godogwana wanted to take it to 17% with no clear benefit to the state,” Swana said.
He said the ANC had been making wrong budget decisions since 2009 causing the Gross Domestic Growth Rate to decline.
