Budget 2025: Tax increases expected amid economic challenges

Cape Town - Finance Minister Enoch Godongwana will deliver his first budget of the Government of National Unity (GNU) on Wednesday, under pressure from a chorus of opposition to any plans to increase taxes.

Godongwana delivers his budget against the backdrop of the US President Donald Trump signing an executive order that freezes funding from the President’s Emergency Plan for AIDS Relief.

This, as the medium-term budget policy statement projected a budget deficit and revised spending down by R21 billion late last year.

Economist, Dawie Roodt, said this year’s budget came at a time when the economy was not doing well.

“It is doing quite badly in fact. We have this new variable, which is the name of Donald Trump,” Roodt said.

He said the country’s fiscal account was in trouble as debt kept rising.

This was compounded by the huge demands on Godongwana from state-owned enterprises to collapsing municipalities, civil servants wanting salary increases and millions of people depending on state income.

He speculated that tax increases were on the cards.

“There will be increases in certain taxes, sin taxes, the fuel levy will go up. I believe some items will be zero-rated,” Roodt said.

He was eager to see the targets Godongwana will set for the country’s economic growth.

“I don’t see the economy growing by more than 1.5%. The President cites 3%, but that is not going to happen. Let’s see if the Minister agrees with the President,” he said.

The DA said the 2025 budget must be a turning point for the economy and demonstrate a commitment to serious, fast tracked reforms towards growth.

“The DA expects that the 2025 budget must focus on unlocking infrastructure investment, policy reform that results in private sector job growth, and improve efficiency through structural reforms,” DA MP, Mark Burke, said.

Burke called on the government to take measures to alleviate the cost of living crisis, including reforms to fuel levies, and a major expansion of the zero-rated VAT basket to enable lower transport costs and better nutrition.

Burke also said there should be a comprehensive spending review to eliminate waste while protecting essential services and that meaningful expenditure reforms should be implemented.

“The DA expects the Minister of Finance to use this opportunity to accelerate economic reforms that drive investment, create jobs and reduce debt.

“The DA will fight against any tax increases and push for a budget that prioritises sustainable growth and financial responsibility,” he said.

Labour federation, Cosatu, said what was needed in Godongwana’s speech was a bold, progressive and aggressive budget to capacitate the state to deliver services and stimulate growth, among others.

“The economy will grow if we fix the state, stimulate growth and slash unemployment. It will not grow by squeezing already badly under resourced public services further,” Cosatu’s parliamentary counsellor Matthew Parks said.

He said Cosatu will vehemently reject any increase on taxes upon the working class, in particular VAT or personal income tax for low-income earners.

“A VAT increase will stoke inflation. Such hikes would suck money out of the economy when it is most needed to stimulate growth. It would send a message to society that government cares more about balancing tables and graphs then workers being able to put food on the table and pay for electricity.”

Parks said revenue must be secured through investing in SARS by providing it with the resources it needs to tackle tax evasion and customs fraud.

GOOD party secretary-general Brett Herron said hard choices needed to be made on fixing unemployment, inequality and poverty.

Herron said the hard choices should include terminating under-delivering programmes as he questioned whether the money spent on the protection of the executives would not be better spent servicing the chronic needs of the people.

“Hard choices need to be made to prioritise access to clean water, access to dignified and affordable housing, and the development of public and freight transport, ports and network industries.”

He said implementing a Basic Income Grant should be priority number one.

The SACP, which is opposed to tax increases, expected the budget to advance the rollout of the National Health Insurance.

“The budget must also take meaningful strides towards a comprehensive social security system by making tangible progress to advance the introduction of a universal basic income grant,” the party said.

ActionSA’s Alan Beesley said his party firmly opposed any tax increases unless accompanied by deep cuts to government luxuries.

“South Africans cannot be expected to shoulder higher taxes whether VAT, personal income tax, or company tax while state corruption and mismanagement continue unchecked,” Beesley said.

Build One South Africa deputy leader Nobuntu Hlazo-Webster said the tabling of the budget by Godongwana was big moment for the GNU government.

“It will show the priorities of this government and will allow us, the people, to determine whether the GNU is a breath of fresh air, or just more hot air,” Hlazo-Webster said.

Cape Argus