This blog was first published by UNU Wider.
With just days to go before the rescheduled 2025 Budget Speech, South Africa faces a ZAR 60 billion revenue shortfall amid slowing economic growth and diminishing international aid. The initial proposal to increase VAT from 15% to 17% met sharp opposition, prompting an unprecedented postponement, the first in the country’s democratic history. But shelving the VAT hike hasn’t resolved the broader question: how should South Africa raise revenue without deepening inequality?
Following the budget’s postponement, reports suggest that discussions have shifted toward a smaller VAT increase rather than the initially proposed two percentage points, although a final decision is still pending. Some Government of National Unity coalition members have opposed any increase, arguing that it would disproportionately affect lower-income households. With the fiscal gap still looming, uncertainty remains over whether VAT will be adjusted or if an alternative revenue measure will take its place.
Regardless of the outcome, the debate highlights a deeper issue: if not VAT, then what?
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