Budget 3.0: Treasury swaps VAT hike for fuel levy and carbon tax to fund R2.58trn budget, targets robust tax collection

Key topics:VAT hike withdrawn; fuel levy raised to compensatePetrol, diesel taxes increase by 2.3% and 3%Treasury trims spending, forecasts 1.4% GDP growth.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Kerry Lanaghan and Patrick Kidd.Due to the withdrawal of the initial 2% VAT increase in the proposed budget of 19 February and the withdrawal of the 0.5% VAT increase subsequently tabled in March, the Treasury has instead proposed an increase in the general fuel levy for petrol and diesel to increase revenue.The proposed increase is in line with inflation, with petrol increasing from R3.85/l to R4.01/l and Diesel increasing from R3.70/l to R3.85/l. The levy increase is effective from 4 June 2025. This is the first time the fuel levy has been increased in three years.The carbon tax is also set to increase from 5 June 2025, from 0.11% to 0.14% for Petrol and 0.14% to 0.17% for Diesel. This means that the total increase in fuel taxes will be 2.3% from 27.6% to 29.9% for Petrol, and 3% from 30% to 33% for Diesel. The Petrol price will increase by R0.19c/l, while the Diesel price will increase by R0.18c/l.Treasury is also cracking down on tax collection to fill the gap in revenue left by the VAT increase commission. The government remains committed to its long-term objectives of broadening the tax base and improving the efficiency and effectiveness of SARS for sustainable revenue collection."Treasury's consolidated expenditure for 2025/26 totals R2.58trn, only down R22bn from Budgets 1.0 and 2.0, which both tabled a consolidated expenditure of R2.6trn. Despite being lower than the initially proposed expenditure, Budget 3.0's expenses are still a R180.9bn increase from 2024.The GDP is forecast to increase from 0.6% in 2024 to 1.4% in 2025. The initial budget tabled in February forecast a 1.9% GDP growth.

Budget 3.0: Treasury swaps VAT hike for fuel levy and carbon tax to fund R2.58trn budget, targets robust tax collection

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