South Africa Says No to VAT Increase - Here's Why It Matters

In a welcome turn of events, South Africans can breathe a sigh of relief as National Treasury confirms that the proposed increase in Value-Added Tax (VAT) will not be going ahead in 2025. While discussions around fiscal sustainability and revenue generation are ongoing, the government has opted to leave the VAT rate unchanged — a move that has significant implications for both businesses and consumers.

A Relief for Households and Small Businesses

With inflationary pressures, fuel price volatility, and rising living costs already burdening households, any increase in VAT would have amplified financial strain — particularly on low- to middle-income earners. Small and medium enterprises (SMEs), which are still recovering from pandemic-era setbacks and economic instability, are also spared from the cost and administrative pressures a VAT hike would have triggered.

Economic Stability in Uncertain Times

Keeping VAT at the current 15% rate provides a degree of economic predictability for businesses in their pricing, budgeting, and financial forecasting. This decision aligns with efforts to stimulate growth, encourage investment, and avoid further erosion of consumer purchasing power.

What Should Businesses Do Now?

Although the VAT rate remains unchanged for now, prudent businesses should still:

• Review their pricing models: Make the most of the stable VAT rate to remain competitive without passing on unnecessary costs to consumers.

• Ensure VAT compliance: With no increase, SARS may focus more on compliance and enforcement to boost collections.

• Plan for the future: The possibility of future tax shifts still looms — businesses should stay informed and agile in their tax strategy.

Horizon’s View

At Horizon Trading Solutions, we welcome the decision not to implement a VAT hike in 2025. We believe this will give businesses breathing room to focus on growth and recovery. As always, we remain committed to helping our clients navigate the tax landscape with clarity and confidence.