SARS
By Karabo Marifi
Cape Town, 28 April 2025 – The South African Revenue Service (SARS) has warned consumers to stay alert for businesses that might still charge a 15.5% Value-Added Tax (VAT) rate, despite a Western Cape High Court ruling on Sunday, 27 April 2025, suspending the planned increase. The court’s decision halted the VAT rate from rising from 15% to 15.5% on 1 May 2025, as initially proposed by Finance Minister Enoch Godongwana. SARS Commissioner Edward Kieswetter urged consumers to ensure they are charged the correct 15% rate, following the legal victory secured by the Democratic Alliance (DA) and Economic Freedom Fighters (EFF). This ruling not only brings relief to South Africans but also underscores the importance of proper parliamentary oversight in fiscal matters.
Court Halts VAT Hike, Sparking SARS Warning
The Western Cape High Court’s ruling on 27 April 2025 put an end to months of uncertainty surrounding a proposed VAT increase. Originally, Finance Minister Enoch Godongwana announced a 2% VAT hike in February 2025 to address fiscal challenges, but fierce public and political backlash forced him to scale it back to a 1% increase, split into 0.5% increments for 2025/26 and 2026/27. Even this revised plan faced opposition, leading the DA and EFF to challenge its legality in court. On 23 April 2025, Godongwana withdrew the proposal, and the court ratified an out-of-court settlement with the opposition parties four days later, officially suspending the 0.5% increase set for 1 May.
SARS Commissioner Edward Kieswetter responded swiftly, warning consumers to be vigilant. “The court’s order suspends the 0.5 percentage point increase that was originally announced to come into effect on 1 May 2025 and there is, therefore, no basis for VAT vendors to implement an increase of VAT rate,” he said. He urged businesses to adjust their systems back to the 15% rate and called on consumers to double-check receipts. “In the unlikely event they are charged 15.5%, consumers should bring this to the attention of the vendor and ensure that this is resolved at the point of sale or otherwise by mutual agreement,” Kieswetter added.
The ruling provides clarity for SARS, with Kieswetter noting, “This is an important order that provides clarity to SARS to effectively and efficiently administer the VAT Act.” However, he acknowledged the practical challenges for businesses that had already prepared for the hike, granting a grace period until 15 May 2025 for those unable to revert immediately, provided they correct it by then.
A Hard-Fought Win for Consumers and Democracy
The court’s decision has been hailed as a triumph for South Africans and a reminder of the power of checks and balances. DA Federal Council Chairperson Helen Zille praised the outcome, stating, “This shows that government decisions cannot be made without proper oversight.” She emphasized that the ruling ensures “changes affecting their pockets will not happen without the necessary checks and balances in place,” calling it “a victory for all South Africans.” The DA had argued that the VAT hike lacked proper parliamentary approval, a stance the court upheld by setting aside the National Assembly and National Council of Provinces resolutions supporting the increase.
The EFF, which joined the legal fight, also celebrated the ruling. National Spokesperson Sinawo Thambo had earlier claimed on 26 April 2025 that the budget process was unlawful, leaving South Africa with “no lawful budget.” The court’s decision to suspend the fiscal framework aligned with the EFF’s push for constitutional compliance, reinforcing Parliament’s role in fiscal decisions.
Public reaction has been equally strong. The African Christian Democratic Party (ACDP) called the reversal “a victory for democracy given the public outrage at the proposed VAT increase” in a statement on 24 April 2025. The South African Federation of Trade Unions (SAFTU) had opposed the hike from the start, arguing on 20 February 2025 that it was “a direct assault on the working class and the poor.” SAFTU welcomed the suspension but continues to demand progressive taxation over austerity measures.
Confusion Looms as Businesses Adjust
Despite the clarity of the court order, SARS has acknowledged potential confusion at the point of sale. Some businesses, having updated systems for the 15.5% rate, may struggle to revert to 15% by 1 May. Kieswetter addressed this in a statement on 25 April 2025, allowing vendors until 15 May to comply fully, though he stressed they should charge 15% wherever possible. “I understand the complexity and the confusion that has resulted from this process,” he said, promising further guidance to support vendors and consumers alike.
Social media posts have highlighted the issue, with one user noting on 25 April 2025, “SARS says all vendors/business that can’t change VAT back to 15% can charge 15.5% but will have until the 15 May to revert back to 15%.” Another user on 26 April called the dual-rate allowance “reckless,” warning of “fertile ground for confusion among vendors and consumers.” This grace period aims to balance practicality with fairness, but it places the onus on consumers to stay alert.
Godongwana, reflecting on the saga, maintained that his original 12 March 2025 proposal was “constitutional and appropriate” given fiscal pressures. In an affidavit filed on 27 April, he explained that the withdrawal came after “various consultations with various stakeholders” and public feedback. The National Treasury echoed this on 27 April, stating, “Minister Godongwana welcomes the court order, as it is entirely consistent with his announcement on 23 April 2025 to suspend the VAT increase.”
Political Fallout and Economic Challenges
The VAT controversy has exposed cracks within the Government of National Unity (GNU). Godongwana accused the DA of turning a “political disagreement” into a “constitutional crisis” in his affidavit, despite their shared GNU membership. The ANC, however, framed the reversal as a sign of “mature leadership.” On 24 April 2025, ANC Chief Whip Mdumiseni Ntuli said it allowed focus to shift to “pro-poor and expansionary aspects of the budget,” while spokesperson Mahlengi Bhengu-Motsiri announced a revised budget proposal within 30 days.
Economically, the suspension creates a R75 billion shortfall over the medium term, according to National Treasury. Without the VAT revenue, the government may cut spending on services like healthcare or education, a move opposed by groups like SAFTU, which advocates taxing the wealthy instead. The DA has suggested cost-saving alternatives, including auditing public sector payrolls for “ghost employees” and freezing non-essential hiring.
The International Monetary Fund (IMF) added to the pressure, lowering South Africa’s 2025 growth forecast to 1.0% on 25 April 2025, citing global economic headwinds and domestic fiscal woes. This downgrade underscores the urgency of finding a sustainable budget solution without overburdening citizens.
What It Means for South Africans
For everyday South Africans, the suspension is a welcome relief amid rising living costs. A single mother in Johannesburg told a local reporter on 27 April 2025, “Every rand counts for us. Paying more VAT would’ve made it harder to buy food and school supplies.” Small businesses, too, benefit from avoiding rushed system changes, though some owners expressed frustration over the flip-flopping policy. “We spent money preparing for 15.5%, and now it’s back to 15%. It’s a mess,” said a Cape Town retailer on 26 April.
The EFF’s Sinawo Thambo called for a broader rethink, stating on 26 April 2025, “The only legitimate and practical way forward is a full reset of the 2025 budget process to re-establish constitutional compliance and fiscal legitimacy.” The party rejects austerity and pushes for stimulus spending, a stance that may shape future debates.
As the dust settles, the court ruling stands as a testament to accountability. Consumers can shop with confidence knowing the 15% VAT rate remains, but SARS’s warning reminds them to check receipts. With a revised budget on the horizon, South Africa faces a critical moment to balance economic stability with the needs of its people.
