Cape Town – Finance Minister Enoch Godongwana is set to present the National Budget in Parliament on Wednesday, following two failed attempts earlier this year due to proposed VAT increases.
The February proposal to raise VAT from 15% to 17% was rejected by Parliament, marking a first in South Africa’s democratic history.
A revised March proposal to increase VAT by 0.5 percentage points also failed, facing legal challenges from the DA and EFF. Godongwana later withdrew the VAT hike altogether.
The scrapping of the VAT increase has left a R75 billion revenue shortfall. Economists expect the gap to be partly addressed through moderate sin tax and fuel levy hikes, though large income or corporate tax increases are unlikely.
This may result in government spending cuts, potentially affecting essential services.
Strengthening tax collection through SARS is also being prioritised, with R800 billion currently owed in unpaid taxes.
Markets remain optimistic that the revised budget will pass, with the rand briefly strengthening ahead of the announcement.
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Compiled by Betha Madhomu
