OUTA welcomes decision to hold VAT at 15%

While the Organisation Undoing Tax Abuse (OUTA) welcomes government’s decision not to increase VAT on 1 May 2025, the debacle that has flowed since this announcement in February could have been avoided through better collaboration and meaningful proactive engagements between GNU partners, ahead of the initial decision.

“It goes without saying that OUTA welcomes this decision, having called on the Minister of Finance not to proceed with the earlier decision to increase VAT and instead, to find ways to, firstly, improve tax collection opportunities and, secondly, to introduce wide-ranging initiatives to reduce unnecessary and wasteful expenditure that takes place on a daily basis throughout government”, says Wayne Duvenage OUTA CEO.

As we stated in our statements to Treasury earlier this year, while we acknowledge tax increases as a tool for stabilising government finances, our government has a history of fiscal mismanagement, high levels of debt, and corruption. The earlier decision to raise VAT flies in the face of government’s claim that it does exercise fiscal discipline, as we have yet to see evidence of improved responsible spending and a significant reduction in the extent of wasteful expenditure.

We trust that government's "decision to forgo the increase follows extensive consultations with political parties, and careful consideration of the recommendations of the parliamentary committees” will ensure that in future, the various parties within the GNU will be far more collaborative and engaging on such serious matters of economic impact, before they make decisions that create unnecessary political rifts and instability for South Africa.

OUTA has no doubt that Treasury and SARS will, given the resources and support, be able to both generate additional revenue and reduce unnecessary and wasteful expenditure, to cover the medium term shortfall of R75 billion identified by the Minister at the time of the Budget2025 announcement in February.

OUTA also sincerely hopes that Treasury and the Ministry of Finance will now adopt a robust approach to introducing recommendations coming out of the spending reviews they have undertaken. In addition, we believe more reviews by Treasury on government expenditure, unnecessary structures and work-streams and grossly inefficient processes need to be undertaken and hopefully involve civil society in these matters.

As stated in the past, OUTA believes the additional funding allocated to the South African Revenue Service (SARS), aimed at enhancing its forensic, investigative, and compliance capabilities, is welcome, however, we are concerned that the increase is only R528m in 2025/26, which brings it equal to the budget in 2023, as it was reduced in 2024/25. In essence, the SARS budget has not increased in the new year, which is essential if SARS is going to significantly improve collections as per the SARS commissioner’s recommendations. This is not good enough and we propose that the SARS budget is increased significantly over the next few years.

Strengthening SARS is essential to ensuring that funds that might otherwise have been lost to tax evasion, illicit financial flows, and non-compliance are now collected and directed into the national fiscus. This is a critical step toward rebuilding an efficient and effective revenue service capable of holding even the most well-resourced tax dodgers accountable.

“We maintain that South Africa doesn’t have a revenue problem, we have a spending problem. Unless we cut waste and corruption, tax increases like VAT are indicative of government’s inability to reform,” says Duvenage.

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