In his 2025 budget, South Africa’s Finance Minister Enoch Godongwana increased the value-added tax rate by 1 percentage point, split over two years, despite widespread criticism that a VAT hike will be hard on poor people.
The minister had little room to manoeuvre with this year’s budget. Corporate tax collections have decreased over the past few years, which he blamed on falling profits and ‘a trading environment worsened by logistics constraints and rising electricity costs’.
South Africa’s top personal income tax rate is already high. ‘Our personal income tax collections as a percentage of gross domestic product (GDP) are far higher than those of most developing countries,’ he said.
The government expects to collect an estimated R811.1-billion in personal income tax revenue and R613.8-billion from domestic VAT in the 2025/26 financial year, according to the Treasury. This is a significant chunk of its total revenue.
Ninety-eight percent of the government’s revenue is from taxes. Personal income tax contributes 40%, VAT accounts for 25%, and corporate income tax 17%.

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