By: Bright Ntuli
Finance Minister Enoch Godongwana has decided to withdraw the proposed 0.5 percentage point increase in the value-added tax (VAT) rate.
In a statement released last night, the minister said the decision followed extensive consultations with political parties and careful consideration of recommendations from parliamentary committees.
With just a week remaining before the VAT increase was set to take effect, Godongwana has written to the Speaker of the National Assembly, indicating his intention to withdraw the Appropriation and Division of Revenue Bills.
This move will allow Parliament to revise expenditure figures to address the revenue shortfall resulting from the cancelled VAT hike.
Godongwana noted that not increasing VAT is expected to reduce estimated revenue by approximately R75 billion over the medium term.
He added that Parliament will be asked to adjust government spending accordingly to ensure that the revenue loss does not compromise South Africa’s fiscal sustainability.
