The African National Congress (ANC) has hit back at political parties claiming “victory” over the reversal of the controversial 0.5% value-added tax (VAT) increase, stating that 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,” said ANC spokesperson Mahlengi Bhengu-Motsiri.
“It is a decision firmly rooted in the national interest and in the moral clarity demanded by our Constitution,” she added during a multi-party media briefing held on Thursday.
The briefing, led by the ANC, included Government of National Unity (GNU) partners such as the Patriotic Alliance, Inkatha Freedom Party (IFP), United Democratic Movement (UDM), Good Party, and opposition parties like Build One South Africa (BOSA) and ActionSA.
Over the past few weeks, parties have been locked in intense negotiations to resolve the budget impasse, sparked by the proposed VAT increase.
News previously reported that Finance Minister Enoch Godongwana officially withdrew the proposed VAT hike that was set to take effect on May 1. The tax will remain at 15%.
The National Treasury confirmed in a statement on Wednesday night that the decision followed extensive consultations with political parties and a review of parliamentary committee recommendations.
It said scrapping the hike would result in an estimated R75 billion revenue shortfall over the medium term.
Godongwana has since written to National Assembly Speaker Thoko Didiza, informing her of the withdrawal.
Parliament will now be tasked with adjusting expenditure to ensure the lost revenue does not threaten fiscal sustainability.
“The decision not to increase VAT means that measures designed to cushion lower-income households against the impact of the rate hike will now be withdrawn,” Treasury said.
“Other expenditure decisions will also be revisited.”
The Democratic Alliance (DA), part of the GNU, and the Economic Freedom Fighters (EFF), which is not part of the GNU, had both opposed the VAT increase and taken legal steps to stop it.
Following the decision, the DA declared “victory,” while the EFF labeled the 2025 budget “misguided, ill-conceived and reckless,” calling for Godongwana’s resignation.
Meanwhile, the GNU will now begin a review of the budget to ensure more efficient state spending.
Bhengu-Motsiri confirmed that the revised finance bill is expected to be tabled in Parliament soon.
“The legislative process that follows will be shaped by our shared developmental priorities, including inclusive economic growth,” she said.
“We will continue to communicate transparently and remain united across party lines to ensure the people’s interests stay at the heart of fiscal policy and governance.”
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