National Treasury has reversed its decision to increase the Value-Added Tax (VAT) which was due to kick in on the 1st of May.
Finance Minister Enoch Godongwana confirmed in a statement
on Thursday morning that the VAT rate will remain at 15%, shelving the proposed
0.5 percentage point hike that was announced during his Budget Speech last
month.
“The decision to forgo the increase follows extensive
consultations with political parties, and careful consideration of the
recommendations of the parliamentary committees,” the statement read.
The decision means an estimated revenue shortfall of R75
billion.
To address this, the minister says he has written to the
Speaker of the National Assembly to withdraw both the Appropriation Bill and
the Division of Revenue Bill. This will allow for revised proposals to be
brought before Parliament to realign spending in light of the lost revenue.
“The measures to cushion lower-income households against
the potential negative impact of the rate increase now need to be withdrawn,
and other expenditure decisions revisited,” Treasury said.
Godongwana noted that any additional revenue collected by
the South African Revenue Service (SARS) may be directed towards offsetting the
shortfall.
The Finance Ministry expects to introduce revised versions
of the Appropriation Bill and Division of Revenue Bill within the next few
weeks.
Done by: Elona Sibunzi
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