How South Africa’s proposed 16% VAT rate compares to other countries around the world | Budget 2025

Although an illustration released by Treasury during the 2025 Budget proposal implies that our VAT rate is among the lowest in the world, adding a broader spectrum of countries to the list shows that South Africa falls somewhere in the middle.

During his Budget Speech on March 12, Finance Minister Enoch Godongwana proposed that South Africa's VAT rate should increase incrementally from 15% to 16%, with 0.5% coming into effect in May this year and a further 0.5% in April 2026.

This has proven to be the most controversial aspect of the 2025 Budget, and the government is facing widespread opposition to this proposal. At this stage there is no guarantee that the Budget will be passed in parliament, as the ANC no longer holds a majority.

But how does South Africa’s VAT rate fare in global terms?

IOL compared 25 countries from across the spectrum, and their tax rates averaged out at 14%. The country with the highest VAT rate in the world is Hungary at 27%, with Sweden not far behind at 25%. The UK, Turkey and Russia are also far above South Africa at 20%, while our proposed rate of 16% matches Mexico and Venezuela.

Among the most tax-friendly countries are Australia and Japan at 10%, while the UAE is theoretically a shopper’s paradise at 5%. 

Some major markets were excluded from our list as they have variable VAT and GST rates. For instance China’s sales tax rate varies from 6% to 13% and India’s from 5% to 18% depending on the goods in question, while the USA’s General Sales Tax (GST) rate varies from 2.9% to 7.25% depending on the region.

India has an interesting tax policy, with 5% applying to essential food and medicine items, 12% for clothing and other foods and 18% for electronics and most services.

A 16% VAT rate will deal a blow to South Africa’s poorest households, although it will be balanced to a degree by increased social grant amounts.

Historically, however, it will be the country’s highest ever sales tax.

Prior to 1991, South Africa’s GST rate varied between 4% and 12% over the years, with the VAT system launching in that year at pegged 10%, albeit with eight zero-rated food items.

The VAT rate increased significantly to 14% in 1993, remaining at that level for 25 years until today’s 15% rate came into effect in 2018 as part of former Finance Minister Malusi Gigaba’s attempt to ease the significant fiscal deficit at the time.

History will repeat itself in 2025, if the incremental VAT increase is approved by parliament, but on the upside, the list of VAT zero-rated food items has been expanded to include specific cuts of meat such as offal, feet and tongues, as well as canned vegetables and dairy liquid blend.

IOL