0.5 Vat Hike Looms For South Africans

The South African Governments proposal to incrementally raise the Value Added Tax VAT rate has ignited significant political and legal disputes, threatening the stability of the current coalition government.

In his 2025 Budget Speech on 12 March, Finance Minister Enoch Godongwana announced plans to increase VAT by 0.5 percentage points in each of the next two fiscal years . The first increase, from 15 to 15.5, is scheduled for 1 May 2025, and the second, from 15.5 to 16, is set for 1 April 2026.

This decision aims to address funding shortfalls in critical sectors such as health, education, transport and security. To mitigate the impact on low-income households, the government proposes expanding the list of zero-rated food items and providing above-inflation increases in social grants.

The Democratic Alliance DA, the second-largest party in the coalition, has filed a court case challenging the legality of the budget process . The DA argues that the parliamentary adoption of the fiscal framework and the proposed VAT increase were procedurally flawed. They contend that the tax hike will disproportionately affect the poor and are seeking an interdict to halt its implementation.

This legal action has deepened tensions within the coalition government, formed after the African National Congress ANC lost its majority in May 2024. The DAs rejection of the budget has led to questions about its continued participation in the coalition, with potential implications for government stability.