South Africa to Raise VAT in Two Phases Starting May, Warns of Fiscal Fallout Without Hike
South Africa’s Value Added Tax (VAT) will increase beginning May 1, according to Finance Minister Enoch Godogwana.
The hike comes amid legal challenges from the Economic Freedom Fighters (EFF) and the Democratic Alliance (DA), with Godogwana warning that failure to implement the increase could gravely impact the country’s fiscal stability.
“Government would be immediately forced either to cut expenditure or increase borrowing,” Godogwana stated, outlining the urgency in his affidavit responding to the court action. He explained that the VAT adjustment would be rolled out in two phases: the first 0.5 percentage point increase taking effect on May 1, 2025, and the second on April 1, 2026.
Defending the decision, Godogwana noted that VAT remains one of the most efficient revenue instruments. “It is broad based, and its design is simple with minimal exceptions. Moreover, South Africa’s VAT rate is still relatively low compared with peer countries,” he added.
Godogwana also criticized the DA for allegedly misinterpreting the VAT Act. While speaking in the Eastern Cape, he said he was “not married to any percentages or any increase,” suggesting a degree of flexibility in implementation depending on fiscal conditions.
The DA, a key member of the Government of National Unity, is challenging the 2025/26 National Budget on two fronts: the procedural handling of the Fiscal Framework by the Finance Committee on April 1, and the constitutionality of allowing budgetary measures to become binding through a ministerial speech. The first part of the case is scheduled for April 22.
