The Government of National Unity’s (GNU) first budget tabled today in Parliament is a punch to the gut of already struggling South Africans. In particular, the overstretched tax base will now effectively face a double tax. Working families will pay more in tax on at least two fronts to foot the bill for government’s unjustifiable choices.
Not only will Value-Added Tax (VAT) increase by 0.5 percentage points each year for the next two years, but there will be no inflationary adjustments to personal income tax brackets, rebates and medical tax credits this year.
This means working, taxpaying South Africans will pay more income tax and receive less tax rebate benefits. By next year VAT will be 16%, and we are now at the peak pressure point of taxing citizens.
Instead of making budget cuts to unnecessary spending, the GNU decided to squeeze the dwindling tax base for an extra R28 billion in tax revenue this year.
This budget does little to stimulate desperately needed economic growth. By choosing increased taxation over effective fiscal reform, the GNU has missed the economic growth train, leaving South Africa stuck in a stagnant or even declining economy.
As spending spirals out of control, debt rises, and the tax base continues to shrink, a national “budget blowout” in the coming years is now a real and alarming possibility. If that were to happen, it would be the ultimate legacy of the GNU’s economic mismanagement.
It must be said that increasing grants does not offset the impact of VAT, particularly because increases to VAT drives inflation. And expanding grants without a larger tax base is a crisis in the making.
VAT hikes were not the only solution. There were alternative paths available. BOSA proposed a number of measures that would have freed up tens of billions of rands and avoided increasing the tax burden on South Africans, including:
- Freeze Middle & Upper Management Hiring
- Reduce State-Owned Enterprise (SOE) Bailouts.
- Streamlining Administrative & Executive Costs in Provincial Government
- Close Unnecessary Diplomatic Missions
- Reduce Cabinet Size
- Abolish VIP Protection for Politicians
- Consolidate Government Marketing Entities
- Reform the Road Accident Fund (RAF)
Instead, the GNU has chosen the easy way out – extracting more from the hardworking citizens of South Africa while protecting its own political interests.
The national landscape is marked by a deepening struggle. While some South Africans barely manage to make ends meet, others find themselves in increasingly difficult circumstances.
The cost of living has skyrocketed—everyday essentials such as food, transport, electricity, school fees, and rent are now beyond the reach of many.
Household debt continues to climb, inflation is driving up bond repayments and rental costs, and economic growth remains stagnant.
Yet, the government persists in its reckless spending, relying on loans to service other loans. It is clear that the future of our children is being mortgaged to pay for the failures of today’s mismanagement.
BOSA will continue to fight for real economic solutions that stimulate growth, create jobs, and reduce wasteful government expenditure, rather than punishing taxpayers for government’s failures.
BOSA Media Statement by
Roger Solomons: BOSA Acting Spokesperson
Wednesday 12 March 2025
Media Enquiries:
Roger Solomons – BOSA Acting Spokesperson – 072 299 3551