The worst of both worlds: Spending cuts and VAT increases

The Institute for Economic Justice (IEJ) issued a statement on 19 February 2025 regarding the Cabinet's decision to postpone the national budget to 12 March 2025. The IEJ criticizes the withdrawn budget for proposing a regressive VAT increase and failing to adequately resource government priorities, while urging the National Treasury to adopt progressive revenue-raising measures and a developmental fiscal policy.

• The withdrawn budget proposed a 2 percentage point increase in VAT, raising it from 15% to 17%. The IEJ argues this is bad policy because it disproportionately affects poor and low-income households and may depress economic activity in a fragile economy. The IEJ notes that a previous VAT increase underperformed expectations, with SARS collecting R325 billion against a National Treasury prediction of R348 billion, a shortfall of approximately R22 billion.
• The IEJ identifies several failures in the withdrawn budget's spending allocations: it failed to resource the expansion of the SRD grant as ordered by the Pretoria High Court, allocated only R20 billion to public employment programmes, and provided insufficient inflation-adjusted increases for healthcare (1.3%), basic education (1.3%), and peace and security (0.3%). Additionally, the budget showed an average fall in per capita non-interest expenditure of 0.7% between 2024 and 2028.
• The IEJ suggests several progressive alternative revenue-raising measures for the National Treasury, including raising Corporate Income Tax back to 28% from 27%, removing tax breaks for high-income earners (such as medical aid or pension links), scrapping employment tax incentives, increasing inheritance and financial transaction taxes, and tapping the Gold and Foreign Exchange Reserve Account (GFECRA).

APA

Institute for Economic Justice (2025). The worst of both worlds: Spending cuts and VAT increases. https://iej.org.za/wp-content/uploads/2025/02/IEJ-Statement-Withdrawn-Budget.pdf

Chicago

Institute for Economic Justice. The worst of both worlds: Spending cuts and VAT increases. 2025. https://iej.org.za/wp-content/uploads/2025/02/IEJ-Statement-Withdrawn-Budget.pdf.

Wikipedia

{{cite press release |author=Institute for Economic Justice |title=The worst of both worlds: Spending cuts and VAT increases |date=19 February 2025 |url=https://iej.org.za/wp-content/uploads/2025/02/IEJ-Statement-Withdrawn-Budget.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@misc{instituteforeconomicjustice2025worst, author = {{Institute for Economic Justice}}, title = {{The worst of both worlds: Spending cuts and VAT increases}}, publisher = {Institute for Economic Justice}, year = {2025}, month = feb, url = {https://iej.org.za/wp-content/uploads/2025/02/IEJ-Statement-Withdrawn-Budget.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }