VAT is one thing, but are other tax penalties on the cards for the revised budget?

The big talking point surrounding the postponement of the 2025 Budget Speech was the proposed VAT hike of 2%, which would have hit all South African consumers at a time when household budgets are already under severe strain.

But regardless of what the Government of National Unity (GNU) decides to announce during the revised Budget Speech on March 12, with many mooting a 1% VAT hike, there are concerns of other tax shocks potentially in the pipeline for South Africans.

For instance, there is a real danger that Finance Minister Enoch Godongwana will once again opt to not adjust the income tax brackets for inflation. 

This means those who receive salary increases that match or outpace inflation would have to pay more income tax as they could land in a different tax bracket, says Everest Wealth’s head of advisory services Riaan Grobler.

It also seems inevitable that ‘sin tax’ increases will be a part of the revised Budget Speech. However, Yusuf Abramjee, founder of Tax Justice SA (TJSA) argues that government should instead focus on combatting the rampant illicit trade that robs the country of more than R100 billion in tax revenue each year.

“Raising taxes on legal alcohol and tobacco products will not generate the revenue the government needs - it will only drive more consumers into the arms of criminals selling illicit goods,” says TJSA founder Yusuf Abramjee. “The fiscus is haemorrhaging billions because law enforcement agencies are failing to crack down on the massive black market in these sectors. This must end.”

Big burden for taxpayers in South Africa

Everest's Riaan Grobler said South Africa’s small tax base was already overburdened, with just over 1.6 million taxpayers paying over 76% of all personal income tax.

“The tax burden is only getting heavier on a smaller number of individuals while the economy is not growing and many taxpayers are leaving the country,” Grobler said.

“The taxpayer base is becoming increasingly disillusioned as they are not getting value for their hard-earned tax money. Instead of finding new ways to tax South Africans more heavily, there should be tax relief to stimulate economic growth."

In response to the Budget postponement, Free SA has called on all political parties within the GNU to reject any tax increases until the government proves it can manage existing funds responsibly. This would ideally mean a renewed focus on cutting unnecessary expenditure as well as closing corruption loopholes.

“The government must understand that South Africans cannot afford to pay for its failures,” said Nolu Hlophoyi, spokesperson for Free SA. “The solution to our fiscal crisis is not to take more money from citizens but to spend public funds better - by cutting waste, eliminating corruption, and growing the economy.”

The organisation is urging the Democratic Alliance to put forward a credible alternative to its fellow GNU members, one that includes pro-growth reforms that will expand the economy and the tax base.

“The postponement of the budget is a sign that things are changing,” Nolu Hlophoyi added. “Now, South Africans must demand that any future budget prioritises economic growth and responsible governance over short-sighted tax hikes.”

IOL