The South African 2025 Budget Review introduces several significant tax proposals aimed at addressing fiscal challenges, promoting economic growth, and supporting vulnerable households. A notable proposal is the increase in the value-added tax (VAT) rate by 2 percentage points to 17 percent, effective from April 1, 2025, expected to raise substantial additional revenue. To mitigate the impact on low-income households, the government plans to expand the list of VAT zero-rated essential food items.
Personal income tax adjustments include full inflationary adjustments for the bottom two tax brackets and all rebates, while the remaining brackets will be partially adjusted, generating an additional R3 billion in revenue. Corporate tax rates remain unchanged, but measures to close loopholes and enhance compliance, such as stricter transfer pricing regulations and anti-avoidance rules, are proposed. Transfer duty on immovable property has been adjusted to accommodate inflation.
Excise duties on alcoholic beverages and tobacco products will increase by 6.83 percent and 4.83 percent, respectively, aligning with inflation and public health objectives. Additionally, a sugar tax will be introduced to curb the consumption of sugary beverages.
The budget also includes measures to support economic growth and employment, such as maintaining the employment tax incentive with adjustments to reflect changes in minimum wages and extending the urban development zone tax incentive by five years. Environmental taxes will see an increase in the carbon tax rate from R190 to R236 per tonne of carbon dioxide equivalent, effective January 1, 2025.
Overall, the 2025 tax proposals aim to enhance revenue collection, promote economic growth, and ensure fiscal sustainability. These measures are expected to provide the necessary resources to support government spending on critical areas such as infrastructure, healthcare, and education, while addressing the challenges of tax evasion and avoidance. The strategic approach to tax policy reflects the government's commitment to creating a fair and balanced tax system that supports sustainable economic development.