The South African Revenue Service (Sars) and the National Treasury are this week expected to play a crucial role in a scramble to reverse the 0.5 percentage point VAT increase scheduled to kick in on May 1.
This comes after finance minister Enoch Godongwana is said to have “responded positively” to a proposal to amend the estimated revenue in his fiscal framework and include a projection that Sars will collect between R20bn and R60bn from its debtors between now and December.
This additional revenue is expected to give him room to offset the VAT increase, which has created friction in the government of national unity (GNU).
Even though VAT will increase by 0.5 percentage points on May 1, this new development is expected to see the Treasury reverse the increase within two months of its implementation.
The expectation is that should the proposal be accepted, rebates will be given to companies and consumers that were charged VAT in the period of its implementation.
Though Godongwana in his replying papers to a DA court challenge on the passing of the 2025 budget says he does not see any alternative to the VAT increase, the Sunday Times understands that both Sars and the Treasury are expected to present the proposal to President Cyril Ramaphosa before the GNU parties meet on Wednesday to finalise a way forward.
The DA’s federal chair, Helen Zille, said the DA is continuing with its case as it is not aware of any process to reverse the VAT increase and that as far as Godongwana's replying papers are concerned he still backs the increase.
“The ANC has not made any requests to us to drop the court challenge as far as I am aware,” Zille said.
Treasury insiders have, however, confirmed that significant progress has been made in finding the money that would enable the government to reverse the VAT hike.
They confirmed that this money is the projection contained in the Sars debtors book and that they have already identified companies and individuals that they would immediately target now that the revenue collector has been allocated more funds.
The Sunday Times has, however, seen a letter written by Rise Mzansi leader and standing committee on public accounts (Scopa) chair Songezo Zibi to Godongwana this week, asking the minister to consider amending his budget to include the new revenue that Sars is projected to collect from its “debtor's book” now that it has been allocated additional funds.
Though he would not confirm the contents of his letter to Godongwana, Zibi confirmed that there was a “pathway” that was likely to be agreed on this coming week which includes additional revenue projections from Sars.
“So at Sars it needs to be money that is in what is called the debt book. In other words, it's beyond saying we’re only collecting 30% of sin taxes to saying we have sent notices to 100 people [debtors], and those notices are worth R60bn,” Zibi said.
“It doesn't have to be money that’s in right now, it has to be money that's going to come in during the financial year. Because the departments don't get allocated everything at once. They get allocated money monthly or quarterly, or every two months, or whatever the case is. They don't get all of it now.”
He said Sars can send allocations to departments for the first four to five months from what is available until money starts coming in from the estimated cash flow estimate that has been identified.
“So the question is: are you able to put that in your cash flow estimations? Because you have actually identified where it would come from. If the answer is yes, then the finance minister would write a letter to the chair of the standing committee on finance and make a submission to say, in this area specifically, the number that we had in the previous tabling, which was X amount revenue, we are now changing to Y amount revenue.
“So basically it's 'we thought we'd collect R10, we're going to collect R11.50', which means the extra R1.50 we're going to get from taxes we don't need anymore — that would be VAT and income tax. They then must come and present so that the committee can see where the money is going to come from. Are you really going to find the money or are you just talking right? So that's why I'm saying the finance minister has to genuinely be able to find the money; it can't be a bulls**t story, it has to be a real thing.”
ActionSA’s Michael Beaumont told the Sunday Times that his party had made the same proposal. But he said the Treasury had been a bit apprehensive of including it in its projected budget revenue.
“Look, we are aware of that and I think a number of parties made that submission, including our own, because the presentations made by the Sars commissioner to the standing committee on finance a couple of months ago has made it clear that there’s 20 to 50-billion rands available on the table for collections right now. So that is a serious option,” Beaumont said.
“The Treasury was initially quite conservative though. They are wanting to model the increase in revenue to be based on performance rather than projections.”
Zibi said he was confident that a solution was possible in the coming week, though it may not necessarily change the implementation date of the VAT increase.
“Basically, let me just say we are more than likely to have the pathway that is proposed in the letter. That is the how we do it. Number two, we would then need political parties to align behind the solution, and that would be implemented in the same week that parliament reopens, which should be the week of the sixth [of May]. The agreement is likely to be this coming week,” he said.
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