New Tax Hikes Expected for South Africa in Upcoming Budget
South African taxpayers should brace for potential increases in fuel and sin taxes when the new national budget is presented on 21 May 2025, though a VAT hike has been ruled out.
Budget Deficit Forces Tough Choices
After two failed budget attempts earlier this year, Finance Minister Enoch Godongwana faces the challenge of closing a significant budget deficit without implementing unpopular VAT increases that were rejected in previous proposals.
According to Investec chief economist Annabel Bishop, the government will likely turn to alternative revenue sources including:
- Higher excise duties on tobacco and alcohol (“sin taxes”)
- Increased fuel levies
- Continued “bracket creep” by not adjusting tax brackets for inflation
Revenue-Raising Measures
The Treasury estimates these measures could generate:
| Measure | Projected Revenue |
|---|---|
| Bracket creep & medical aid credits | R19.5 billion |
| Higher excise duties | R1 billion+ |
| Fuel levy increases | R4 billion |
SARS Strengthening Efforts
The South African Revenue Service (SARS) is expected to play a crucial role in improving tax collection, with the agency having identified over 150,000 non-compliant taxpayers. SARS reported:
- 6.6% tax revenue growth in 2024/25
- 12.6% increase in personal income tax collections
Economic Growth Concerns
With GDP growth projections being revised downward to between 1.0% and 1.5% for 2025, the government faces challenges in maintaining fiscal sustainability. Bishop notes that South Africa needs growth above 3.0% for long-term financial health.
The conservative approach to the upcoming budget is expected to prevent negative reactions from financial markets and credit rating agencies.
Source: BusinessTech