Reversal of VAT should not open the door for budget cuts

The Institute for Economic Justice (IEJ) supports the reversal of a planned VAT increase but warns against the National Treasury's proposal to implement budget cuts to cover the resulting revenue shortfall. The IEJ argues that progressive revenue alternatives exist to avoid austerity for vulnerable populations.

• 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 for 2026/27, and suggests this necessitates "expenditure adjustments to cover this shortfall in revenue".
• The IEJ asserts that a 0.5% VAT increase would only secure R13.5 billion, representing 0.5% of the national budget, and notes that a revenue overrun of approximately R9 billion collected by SARS could largely fill this gap without budget cuts.
• The IEJ proposes several immediate revenue sources to avoid budget cuts: 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 returning 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 implementing 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} }