24 April 2025 — In a significant development for South Africa’s economy and citizens, the government has withdrawn its proposed increase of Value-Added Tax (VAT) from 15% to 15.5%. This decision comes after strong opposition from various sectors of society, including civil society groups, economists, and community organizations, who warned of the potential harm such an increase could bring.

So, what would a VAT increase have meant for you — and what does its cancellation mean for the country?

What Is VAT and Why Does It Matter?

VAT is a consumption tax added to most goods and services at each stage of production and sale. In South Africa, VAT is currently set at 15%, affecting the majority of products consumers use daily.

Because it is a regressive tax, VAT tends to hit low- and middle-income earners the hardest, taking a larger portion of their income compared to wealthier households.

What Would a 15.5% VAT Have Meant for You?

Though a 0.5% increase may sound minimal, its ripple effects across the economy would have been felt widely:

• Higher prices on goods and services: Everything from groceries to transport and prepaid electricity would likely have become more expensive, especially non-zero-rated items.
• Increased pressure on household budgets: Many families are already battling high inflation, interest rates, and the cost of living. An increase in VAT would have made basic living even more costly.
• Reduced consumer spending: As everyday items became pricier, households might have cut back on spending, affecting local businesses and overall economic activity.

Why Was the VAT Increase Proposed?

The proposed VAT hike was intended to:

• Increase government revenue to address budget shortfalls,
• Fund essential public services like healthcare, education, and social grants,
• Support infrastructure development and service delivery.

However, concerns were raised about the fairness of targeting everyday consumers, especially when other revenue alternatives could be explored — such as improving tax collection, cutting wasteful expenditure, or implementing more progressive tax measures.

Industry Perspective: Property Sector Reacts

Leaders across multiple industries welcomed the decision, including the real estate sector, which has felt the impact of rising living costs and economic pressure on homebuyers.

“This is a positive move for everyday South Africans and for our industry,” said MJ Dafel, CEO of Property.CoZa South Africa. “The proposed VAT increase would have added to the financial pressure facing both homebuyers and sellers. Stability in the tax landscape allows us to focus on helping people achieve their property goals without the added weight of rising transactional costs.”

What Happens Now That It’s Been Halted?

With the VAT increase no longer on the table, here’s what South Africans can expect in the short term:

✅ Immediate relief from rising living costs
✅ Stability in retail pricing for most goods and services
✅ Continued focus on finding sustainable ways to manage the national budget
✅ Pressure on decision-makers to prioritize fair and efficient fiscal strategies

The decision not to proceed with the VAT increase brings welcome relief to millions of South Africans, especially those who already feel the economic strain. It also provides an opportunity to explore more equitable ways of raising revenue without placing a heavier burden on everyday citizens.

While the road to economic recovery is still long, this move shows that with enough public engagement and scrutiny, financial decisions can reflect the needs of the people.

For now, your grocery bill stays the same — and for those looking to invest in or sell property, it’s one less financial hurdle to worry about.