Minister of Finance, Enoch Godongwana delivers the Devision of Revenue Bill (Budget Speech) to Members of the National Assembly.
Image: Jairus Mmutle/GCIS.
Cabinet has welcomed the proposed 2025 National Budget.
Speaking during a Cabinet meeting on Thursday, Minister in the Presidency Khumbudzo Ntshavheni, said the budget sought to keep a balance between the country's fiscal framework, fund government's administration and mitigate negative impact on both poor and middle-income homes.
This week, Finance Minister Enoch Godongwana, delivered a revised budget after the Democratic Alliance rejected the initial budget which imposed a 2% Value Added Tax (VAT) increase.
Speaking on Wednesday, the minister said government proposed a two-part VAT increase; 0.5% in 2025/26 and 0.5% in 2025/27.
Godongwana said the first increase will take effect from May 1, 2025 with the second increase kicking in from April 1, 2026.
According to Ntshaveni, the allocation of over R1 trillion to infrastructure development over the Medium-Term Expenditure Framework (MTEF), the establishment of alternative infrastructure financing through a credit guarantee vehicle and the introduction of multiple bid windows on the Budget Facility for infrastructure is a demonstration of commitment to grow the economy through a strong infrastructure-build programme, whilst simultaneously improving service delivery.
She added that mechanisms for private sector participation as announced with the Budget, which are part of Operation Vulindlela driven reforms, in the energy, transport and freight logistics sectors indicate government’s commitment to fast-tracking private sector investment and inclusive economic growth.
She said the budget, acknowledging the impact of the tax increases, provides for mitigation measures against the increases such as no increase in the fuel levy, above inflation increases to social grants, with old age and disability grants increasing by R130 to R2315 in 2025 and significant funding allocation to the Passenger Rail Agency of South Africa (Prasa) to improve passenger rail transport which will reduce household income spend on transport costs.
"Most significantly, the tax increases are going to finance sustainability of this country, by maintaining 11,000 teachers in the classrooms, 9300 health-workers in their jobs, the employment of 800 post-community service doctors and allow an additional 700, 000 children (4-years of age) access to early childhood development which is the necessary foundation education they need for a successful education journey," the minister said.
Despite Cabinet's green light, there has been fierce opposition to the proposed budget.
The Democratic Alliance (DA) has made it clear that it will not support the budget.
"The African National Congress (ANC) VAT budget doesn’t have a majority, and the DA won’t give it one. It is now up to the ANC to fix the mess it has created," the party said.
It added that the ANC refused to agree to a temporary tax increase among other measures.
Riaan Grobler, Head of Advisory Services at Everest Wealth, added that this so-called compromise on VAT merely shifts the pain for taxpayers.
"Personal income tax brackets are not being adjusted for inflation, which means that individuals receiving inflation-linked or higher salary increases will end up paying more income tax as they move into higher tax brackets," he said.
seanne.rall@iol.co.za
IOL