Budget 2025 not approved but also not a crisis – Treasury

The fact that Budget 2025 has not been approved yet is not a crisis, although it does cause stress for Treasury and the people of South Africa. However, it is important not to politicise passing Budget 2025.

Chris Axelson, acting deputy director general for tax and financial sector policy at National Treasury, says other countries take much longer to finalise their budgets, although it is the first time that the budget was not finalised before the Budget speech.

Axelson was speaking at a PSG Think Big webinar about Budget 2025.

“We are new at this and there is a strengthening but it is getting a bit too political. As technocrats we are just trying to get the balance between revenue and expenditure right.”

What happens if parliament does not approve Budget 2025? Axelson says then Treasury must go back to the drawing board.

However, he hopes that Budget 2025 will be approved in the next two weeks.

But, it will become a problem as 1 May – the date that the VAT increase comes into effect – gets closer, as it cannot be implemented if it has not been approved.

ALSO READ: Budget 2025: Here’s how you can object to the VAT increase

VAT increase in Budget 2025

He defended the increase in VAT of 0.5% this year, although the 2024 Medium Term Budget Policy Statement (MTBPS) called for cutting expenses instead of increasing taxes, saying that there were issues that needed to be fixed by spending more money.

“We could not borrow more and therefore we had to turn to revenue and it was not such a large shortfall that we had to make up for.”

He emphasised that he believes the VAT increase will have the smallest impact on economic growth.

Axelson also acknowledged that low-income consumers who do not qualify for a grant will find it difficult to make ends meet under Budget 2025.

In the first version of Budget 2025, that asked for a VAT increase of 2%, grants would increase by R50 while the bottom two income tax brackets were adjusted for inflation.

However, in the new version that is now on the table, there is only an increase of R30 in grants and no adjustment of the tax brackets.

Axelson also pointed out that Godongwana said the other 0.5% VAT increase pencilled in for next year could be scrapped if revenue picks up and expenditure decreases, but he added he does not believe expenditure can be reduced so quickly.

ALSO READ: EXPLAINER: Budget speech tabled, but will it be approved without DA’s backing?

Everyone agrees South Africa has expenditure problem

He said all political parties and Treasury agree that South Africa has an expenditure problem.

“We need more efficient expenditure. The trick is that it is very difficult to get rid of that expenditure tomorrow because you do not know where it is as there is no lien item that says this is inefficient expenditure, let us cut that.”

Although Treasury conducted more than 220 spending reviews over the past twelve years that included leases for government offices, tourism incentives and the cost of embassies in other countries, the problem was to implement them, Axelson said.