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Petrol attendan fills fuel into a vehicle.
Finance Minister Enoch Godongwana has proposed a revised National Budget that abandons the VAT hike and introduces new tax proposals generating R18 billion in additional revenue in 2025/26, and R19 billion in 2026/27.
While presenting Budget 3.0 on Wednesday, Godongwana told Parliament that he would be increasing the fuel levy for the first time in three years.
“This tax measure alone will not close the fiscal gap over the medium term,” he said
“From the 4th of June this year, the general fuel levy will increase by 16 cents per litre for petrol, and by 15 cents per litre for diesel.”
Godongwana said additional tax proposals for 2026/27 will need to generate R20 billion, unless SARS is able collect additional revenue to plug the revenue gap.
This move comes amid the scrapped VAT rate increase proposed in Budget 2.0 in March 2025 which would have raised R28 billion in 2025/26 and R14.5 billion in 2026/27.
Additional cuts include the expansion of the zero-rated basket meant to cushion poorer households from the now-scrapped VAT rate increase.
“The reality, however, is that the decision to do away with the VAT increase, without a viable alternative source of revenue, significantly reduced our ability to fund additional government programmes and projects to the extent we had deemed necessary.”
He told Parliament that new tax revenue projections have left the national coffers with R61.9 billion less over the three years.
Despite a bleak economic outlook, the minister projected an optimistic economic growth rate of 1.4 percent in 2025.
“This is lower than the 1.9 percent we projected in March,” says Godongwana.
Godongwana says economic growth projections were lowered over the past two months in light of a weaker global outlook, trade frictions, increased uncertainty and lower projected investment. The latest data from National Treasury forecast geopolitical tensions and reconfiguration of supply chains as a risk to foreign investment.
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