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Parliament has to facilitate public engagement around the proposed VAT increase.
Residents of the Mangaung Metro at the public hearing on the Expropriation Bill debate in Bloemfontein on 31 May 2023. Picture: Gallo Images / Mlungisi Louw
While Parliament examines the budget, South Africans have an opportunity to voice their concerns regarding the proposed 0.5% increase in value-added tax (VAT) through public consultations.
The budget has already encountered resistance, with multiple political parties opposing the proposed revenue and expenditure plans.
Public participation in budget process
Historically, budgets have been passed in Parliament without any changes.
However, with the ANC no longer holding a majority, the party now requires support from other parties to secure approval for the budget.
This shift increases the role of both parliamentarians and the public in influencing budget decisions, particularly regarding the VAT increase.
Parliament is constitutionally mandated to facilitate public engagement, ensuring that citizens have a reasonable opportunity to contribute to the lawmaking process.
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Public participation can take various forms, including public hearings, petitions, and written submissions.
According to the public participation model, citizens can email their contributions to committee secretaries or designated addresses linked to a bill.
Additionally, they may share their views through community radio stations or request to make oral submissions during virtual or in-person public hearings.
Budget framework
On 12 March, Finance Minister Enoch Godongwana delivered the national budget for the 2025/2026 financial year, which commences on 1 April.
The budget review consists of multiple financial components that undergo parliamentary scrutiny.
A key component of the budget is the fiscal framework, which outlines economic policies and revenue projections while setting government spending limits.
For the fiscal framework and revenue proposals to be approved, at least one-third of the members of parliament (MPs) must be present, and a majority of those present must vote in favour.
Parliamentary review and VAT legislation
According to Parliamentary Budget Office (PBO) director Dumisani Jantjies, the relevant parliamentary committees need to pass the fiscal framework and revenue proposals within 16 days of the budget’s tabling.
This is in accordance with the Money Bills Amendment Procedure and Related Matters Amendment Act.
However, the law allows for flexibility if delays arise.
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Following committee deliberations, a report must be submitted to the National Assembly and the National Council of Provinces (NCOP).
“For all these instruments, committees must table their reports where they accept, reject or amended these proposals,” Jantjies told MPs in a joint meeting of the finance and appropriations committees on Tuesday.
The Money Bills Act also allows Parliament to make amendments to the budget.
Watch the meeting below:
Implications of the VAT increase
South Africa’s VAT rate currently stands at 15%, with the proposed increase set to take effect on 1 May.
In light of this, Jantjies highlighted that the Rates and Monetary Amounts and Amendment of Revenue Laws Bill must be considered and passed, as it includes the VAT hike as a revenue proposal.
The Rates Bill proposes changes to tax rates, rebates, and monetary thresholds — including amendments to the VAT Act.
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Jantjies told MPs that Parliament have 12 months to approve laws giving effect to a tax increase.
“The VAT Act requires a Rate Bill to be passed by Parliament for the proposed VAT increase to become effective.”
He also pointed out that such legislation is typically finalised in October, based on historical trends.
“The adoption of the fiscal framework alone cannot necessarily give effect to the Rates Bill or implementing the tax increase,” Jantjies added.
Public participation under threat?
This may be challenging for Parliament since public input on the Rates Bill is required before it becomes law, especially with the 1 May deadline approaching.
“If the VAT increase takes effect prior to the Rates Bill being passed by Parliament, it may undermine Parliament’s public participation process.
“This would be particularly concerning as the approved fiscal framework, assuming this is done within 16 days or as soon as reasonably possible thereafter, would presumably already reflect the increased revenue from the VAT new rate of 15.5%.”
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Jantjies further clarified that while the fiscal framework serves as a policy document, it does not have the legal authority to enforce the VAT hike.
“Should the parliamentary process considering the Rates Bill conclude amendments before being passed then the VAT increase cannot be reversed.”
He also recalled the controversy surrounding the previous VAT increase from 14% to 15% in 2018.
“The VAT increase should be implemented, in our view, only once the Rates Bill has been passed in line with the Money Bills Act and that really strengthens the role of Parliament.”
As Parliament navigates the complexities of the budget process, public participation remains a critical component in determining the final outcome of the proposed VAT increase.
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