The African Christian Democratic Party (ACDP) welcomes National Treasury’s announcement to rescind the proposed 0.5% VAT increase. We were one of the political parties that opposed the VAT increase, initially at 2% and now at 0.5%, by voting against the Fiscal Framework and Revenue Proposals on 2 April 2025.
The ACDP is on record calling for a senior counsel’s legal opinion on what we believe was a flawed process in the Standing Committee on Finances. It seems this concession was largely made as a result of the High Court application brought in the Western Cape to interdict the implementation of the VAT increase.
This is a victory for democracy given the public outrage at the proposed VAT increase.
We are concerned that it has taken two months of wrangling to reach this decision. Businesses have had to prepare their systems to implement the 0.5% increase from 1 May 2025. This will now have to be reversed, through what in effect will be a third Budget that Parliament will have to pass.
The ACDP remains concerned that personal tax brackets and rebates will not be adjusted for inflation this year – for so-called bracket creep. This results in effect to a tax increase that will, according to National Treasury, raise revenue of R19.5bn. We trust that this issue will also be considered by the new Budget.
We also trust that the new Budget will consider the economic growth projection of 1.9% of GDP, which the ACDP questioned, and the Standing Committee on Finance called ‘too optimistic’. The International Monetary Fund (IMF) has revised the county’s growth forecast to 1% of GDP, which is far lower than National Treasury’s growth forecast of 1.9% of GDP. This brings National Treasury’s revenue and other projections into question.
The solution is to present a pro-growth budget that cuts unnecessary spending and wastage, and makes investment and job creation a priority. The ACDP calls on government to discontinue all underperforming and unnecessary programmes.
Lastly, the ACDP believes that closing the tax gap (between what is owed to SARS and what it collects – estimated to be R800bn) by only 10% would result in an additional R80bn for state coffers. The extra R8.8bn SARS collected by the end of March 2025 can also help balance the books.
