What Happened
The South African government has officially withdrawn a proposed R20 billion tax increase for Value Added Tax (VAT) that was initially included in the 2026 Budget. This decision was announced by Minister of Finance Enoch Godongwana during the budget tabling in Parliament on February 25, 2026. The withdrawal is attributed to the resilience of the tax system despite slow economic growth, with gross tax revenue revised up by R21.3 billion compared to previous estimates.
Why It Matters
In addition to the withdrawal of the tax increase, the Treasury has proposed significant adjustments to tax thresholds, including the VAT compulsory registration threshold, which will increase from R1 million to R2.3 million. This change aims to alleviate the financial burden on small businesses and is set to take effect on April 1, 2026. Furthermore, the voluntary VAT registration threshold will rise from R50,000 to R120,000, marking the first adjustment since 2009. These changes are crucial as they reflect the government’s response to the evolving economic landscape and the need to support local businesses.
What’s Next
As the new VAT registration thresholds come into effect, small businesses will have more flexibility regarding VAT registration, potentially reducing compliance costs. The government is also proposing additional tax measures, including adjustments to personal income tax brackets and rebates in line with inflation. These initiatives aim to foster savings and investment, ultimately contributing to economic growth and stability.
