Rise Mzansi expects that the controversial proposal to raise VAT by 0.5 percentage points will be withdrawn as part of a political resolution to the budget impasse.
The expectations were outlined by Rise Mzansi leader Songezo Zibi in submissions to the finance minister, Enoch Godongwana on alternative revenue streams to the consumption tax. They include reining in public sector wastage, winding down spending on the SA mission in the Democratic Republic of Congo and implementing a tax on gambling.
Rise Mzansi, which has two seats in the National Assembly, is a part of the government of national unity (GNU) and voted to support the fiscal framework of the budget, which contains the VAT hike. Parliament can suspend the VAT increase if it passes a new Rates and Monetary Amounts Amendment Bill, but that’s unlikely because MPs are on a two-week constituency period and parliamentary process will not be completed by May 1. The suspension of the hike is unlikely to be implemented, considering the legislative requirements.
Zibi, who is also the chair of the standing committee on public accounts — the parliamentary body that oversees the financial statements of all government departments and state institutions — is seeking a revision of the fiscal framework, which contains revenue projections and sets the overall limits for government spending.
The proposed revision would reflect the additional tax collected by the SA Revenue Service, which received R7.5bn over the next three years to support its continued modernisation.
Deliberations on the VAT increase are continuing among the 10-member GNU and other parties represented in parliament ahead of the implementation of the hike on May 1. Business Day understands that parties within the coalition and those in opposition continued to oppose the hike at meetings led by the ANC over the weekend.
“The events that have unfolded since February when you [Godongwana] were initially supposed to table the budget before the National Assembly have tested the credibility of our politics and caused actual financial damage,” Zibi said in the submissions dated April 15.
“The damage is in respect of stock valuations on the JSE and (arguably) the yield on government bonds at a time when we should be trying to pay less, not more interest on sovereign debt.
“Assuming a resolution to the impasse will result in the effective withdrawal of the VAT revenue proposal, it will simultaneously affect measures you have proposed to mitigate the impact of VAT (an expanded basket of zero-rated goods). This will restore R2bn to the bottom line, which means the total additional revenue needed amounts to just under R30bn.”
Though the deadlock is primarily centred on revenue-raising measures, a resolution could also incorporate spending-side adjustments, Zibi said. He added that the proposals are aimed at addressing the proposed VAT increase and the decision not to adjust personal income tax brackets for inflation.
The additional allocation to Sars announced by Godongwana on March 12 was intended to upgrade compliance infrastructure, expand the use of AI and boost tax recovery efforts — measures aimed at further improving collection efficiency and reducing reliance on future tax increases.
“Given the additional fiscal allocation to Sars and the revenue momentum achieved towards the end of the previous financial year, there is scope for an upward revision of the revenue projection for the 2025/26 financial year,” Zibi’s submission states.
“Sars will, as demonstrated before, be able to generate an additional minimum of R40bn by December 31 2025. This would assume only 30% (R31bn) of the R107bn disputed debt (Sars collects more than 80% of disputed tax claims), and 5% of the undisputed debt (R21.1bn).”
“There is therefore sufficient additional revenue to offset the VAT and PIT [personal income tax] measures and as such can be substituted. If the Treasury determines that such additional revenue is entirely feasible, there would be sufficient fiscal headroom to revise the revenue assumptions in the fiscal framework. Although revising the framework so soon is not ideal, it is better to do this because of positive developments, and additional revenues are positive.”
The National Assembly endorsed the fiscal framework along with a recommendation that the Treasury find alternatives within 30 days to the one percentage point VAT increase over two years and the non-adjustment of personal income tax brackets to account for inflation, a total of R31.5bn.
“The work done by National Treasury and the Government Technical Advisory Centre, the results of which have not been meaningfully applied, would serve as an interim report, while parliament’s finance committees work with you on an updated spending review,” Zibi said.
“It is our view that we can redirect billions of saved rands towards critical services, instead of trying additional taxes.”
Update: April 16 2025
This article has been updated.
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