Reversal of VAT should not open the door for budget cuts

The Institute for Economic Justice (IEJ) welcomes the reversal of a VAT hike but warns that the National Treasury should not use the resulting revenue shortfall to implement budget cuts. The IEJ argues that the Treasury's claim of a R75 billion shortfall over the medium term is a 'false binary' and suggests alternative funding sources, such as tapping into the Gold and Foreign Exchange Reserve Account (GFECRA), removing tax breaks for high-income earners, and raising the Corporate Income Tax rate.

• The National Treasury claims that reversing the VAT hike will create a revenue shortfall of R75 billion over the medium term, which includes a planned 0.5 percentage point increase in 2026/27, and suggests this necessitates "expenditure adjustments to cover this shortfall in revenue".
• The IEJ asserts that the 0.5% VAT increase would have only secured R13.5 billion in revenue, representing 0.5% of the national budget, and notes that a SARS revenue overrun of approximately R9 billion could largely fill this gap without budget cuts.
• The IEJ proposes several immediate revenue alternatives to avoid austerity: utilizing the Gold and Foreign Exchange Reserve Account (GFECRA), which has over R300 billion; removing tax breaks for those earning over R1 million per year (valued at R60.4 billion in 2024/25); and increasing the Corporate Income Tax rate to 28%, which would have raised R12 billion in 2024/25.
• For medium-term revenue generation and inequality reduction, the IEJ suggests the implementation of a wealth tax, a social security tax, and a financial transactions tax.

APA

Institute for Economic Justice (2025). Reversal of VAT should not open the door for budget cuts. https://iej.org.za/wp-content/uploads/2025/04/IEJ-statement-on-removal-of-VAT-1.pdf

Chicago

Institute for Economic Justice. Reversal of VAT should not open the door for budget cuts. 2025. https://iej.org.za/wp-content/uploads/2025/04/IEJ-statement-on-removal-of-VAT-1.pdf.

Wikipedia

{{cite press release |author=Institute for Economic Justice |title=Reversal of VAT should not open the door for budget cuts |date=24 April 2025 |url=https://iej.org.za/wp-content/uploads/2025/04/IEJ-statement-on-removal-of-VAT-1.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@misc{instituteforeconomicjustice2025reversal, author = {{Institute for Economic Justice}}, title = {{Reversal of VAT should not open the door for budget cuts}}, publisher = {Institute for Economic Justice}, year = {2025}, month = apr, url = {https://iej.org.za/wp-content/uploads/2025/04/IEJ-statement-on-removal-of-VAT-1.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }