Finance Minister Enoch Godongwana has confirmed that South Africa’s Value Added Tax (VAT) will increase by 0.5 percentage points from 1 May 2025, with a second 0.5 percentage point increase scheduled for 1 April 1 2026.
The decision – outlined in a responding affidavit to court action initiated by the Economic Freedom Fighters (EFF) and the Democratic Alliance (DA) – has sparked fierce debate and highlighted fractures within the Government of National Unity (GNU).
“Government would be immediately forced either to cut expenditure or increase borrowing (if the VAT hike was blocked),” Godongwana warned.
He described VAT as a broad-based, efficient revenue source, arguing that South Africa’s VAT rate remains low compared to global peers.
DA legal challenge: ‘Unjust and unconstitutional’
The Democratic Alliance has filed court papers with the Western High Court, contesting the legality of the 2025/26 National Budget process.
The party claims that:
- The Finance Committee’s April 1 approval of the Fiscal Framework lacked due process.
- Certain revenue and expenditure measures were enacted without full parliamentary oversight.
The first part of the legal challenge is set to be heard on 22 April 2025.
“This VAT increase will hit the most vulnerable the hardest,” said DA Federal Chairperson Ivan Meyer.
“We believe the procedure was flawed and the hike itself is unjust.”
Tensions mount within the GNU
The VAT increase has deepened tensions within the Government of National Unity, with the DA’s position in the coalition now under serious scrutiny.
The FW de Klerk Foundation has urged the DA to remain in the GNU despite differences, amid speculation over potential realignment or fragmentation of the governing coalition.
Godongwana, during an oversight visit in the Eastern Cape, attempted to diffuse the political tension, stating he is “not married to any percentages or any increase,” implying potential flexibility under further negotiation.
What it means for you
- The VAT rate increase takes effect on 1 May 2025, potentially raising the cost of goods and services.
- A second increase is planned for 1 April 2026.
- The full impact will be closely watched, particularly on lower-income households and consumer spending.
Have you factored in how much more you’ll be spending after the new VAT -percentage kicks in?
Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 1
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