Treasury: Scrapping VAT hike will leave a R75 billion gap over next 3 years

JOHANNESBURG - National Treasury said that the scrapping of the value-added tax (VAT) increase would leave it with a R75 billion gap over the next three years.

In an overnight media statement, the Treasury announced that Finance Minister Enoch Godongwana would be reversing the decision to hike VAT.

VAT was due to be increased by 0.5 percentage points from next week Thursday and another 0.5 percentage points next year.

This would have seen VAT go up from 15% to 16% in one year.

In several public statements and even in court papers, Godongwana repeatedly said that he could not reverse the VAT increase.

The minister had also said that Treasury could not find other ways to raise the required revenue to keep government running, outside of increasing taxes.

However, in this recent statement, Godongwana is singing a different tune.

He said that Parliament would have to adjust its expenditure to cover the R75 billion shortfall.

Godongwana said he had also considered inputs from political parties on how to achieve this.