Finance Minister Enoch Godongwana has outlined a new tax proposal to increase value-added tax (VAT) by 0.5 percentage points in this financial year and the same again in 2026. This will take the VAT rate to 16% in 2026. Godongwana's new proposal will raise the VAT rate to 15.5% in the current financial year.

VAT INCREASE

Godongwana said the decision was not made lightly. "No minister of finance is ever happy to increase taxes. We are aware of the fact that a lower overall tax can help to increase investment and job creation and also unlock household spending power," he said. He added that a VAT increase was crucial to raise the revenue needed to fund health and education needs. "We have, however, had to balance this knowledge against the very real, and pressing service delivery needs that are vital to our developmental goals and which cannot be further postponed."

SIN TAX

Consumers of alcoholic and tobacco products are once again facing the annual tax increases for their sins. Selected excise duties on alcoholic beverages and tobacco products will increase from 4.75 % to 6.75%, effective immediately. The specific increases are as follows:

• Ciders and alcoholic fruit beverages: an increase of 16 cents per 340ml can;
• Spirits: an increase of R5.97 per 750ml bottle;
• Unfortified wine: an additional 29 cents per 750ml bottle;
• Fortified wine: an increase of 48 cents per 750ml bottle;
• Sparkling wine: an additional 90 cents per 750ml bottle;
• Cigarettes: an increase of R1.04 per packet of 20;
• Cigarette tobacco: an increase of R1.16 per 50g;
• Pipe tobacco: an increase of 50 cents per 25g;
• Cigars: an increase of R8.49 per 23g; and
• Vapes will see an increase of 14 cents per ml.

SRD GRANTS

The Social Relief of Distress (SRD) grant has been extended for another year with R35.2 billion allocated to keep the monthly grant. Godongwana was criticised earlier for suggesting that the grant be stopped. The minister said more than R284 billion has been allocated for social grants. The old age and disability grant will see an increase of R130, bringing the total to R2,315. The child support grant will rise by R30, resulting in a new amount of R560. Additionally, the foster care grant will be augmented by R70, reaching R1,250. "The truth is, ours is one of the most comprehensive social safety nets among emerging economies. This reflects our commitment to addressing poverty and inequality while keeping our spending sustainable."