VAT victory means cutting BEE tax is the honest way to fill fiscal gap – IRR

If Treasury is serious about fiscal responsibility, the next step is clear: cut BEE premiums and deliver value-for-money governance across the board.

The Institute of Race Relations (IRR) says that while the dramatic reversal of the VAT hike is to be welcomed, the real test for the National Treasury begins now.

With an alleged R75-billion budget shortfall looming, South Africa cannot afford to return to the failed formula of tax-and-spend economics.

Cutting BEE premiums and delivering value-for-money governance across the board must be the goal.

As set out in the IRR’s Blueprint for Growth paper, Cut VAT and BEE, these premiums, which inflate state procurement costs by up to 25%, are not empowering the disadvantaged. Instead, desperate communities are paying the price of perpetually enriching an elite politically connected BEE mafia. Cutting these premiums would save enough not only to close the fiscal gap, but to lower VAT to 11,5%, ease pressure on the poor and boost real service delivery.

IRR research shows that, because of BEE public procurement premiums, South Africans pay a de facto BEE tax of R150 billion every year. 

Over the past weeks, the IRR has actively engaged with parliamentary representatives from across the political spectrum, including the IFP, Rise Mzansi, GOOD, Al Jama-ah, PAC, BOSA, ActionSA, DA, ACDP, FF Plus, MK and EFF, to build a parliamentary majority consensus behind two urgent reforms: cutting VAT and cutting BEE premiums. This is not only achievable, but essential. 

Says Hermann Pretorius, IRR head of strategic communications: “Across the political aisle, there is growing recognition that South Africans cannot be taxed into prosperity, and nor can our economy be extorted into growth. The tide is turning. We are seeing unlikely alliances and a new, genuine openness to pro-growth reforms. Now is the moment for Parliament to act, to protect all taxpayers, confront blatant elite enrichment, and remove the BEE barrier to growth. For as long as BEE premiums eat into the taxes paid by ordinary people, South Africans will be forced to pay an extortionate BEE tax. This simply cannot continue.” 

Real-life examples of the BEE tax in public procurement are shocking. A school that should cost R15 million inflates to R40 million. Bottled water is sold at R27 instead of R7. Knee pads are billed at R935,000 instead of R4,000. This is not transformation. It is taxpayer exploitation to line the pockets of cadres, crooks and cronies. 

As laid out in the IRR’s Blueprint for Growth research, the alternative is a simple, compelling one: cut waste, reduce VAT and let the market work for ordinary people. 

Says Pretorius: “To all political parties the IRR says simply this: you cannot fight poverty while defending the cronyism that sustains it. Cut BEE. Cut VAT. Let South Africans keep more of what they earn so that they can have a real stake in a growing economy.” 

Read The IRR’s Blueprint for Growth: Cut VAT and BEE here: https://irr.org.za/reports/the-irrs-blueprint-for-growth/the-irr-blueprint-for-growth-2025/2-the-irrs-blueprint-for-growth-2-cut-vat-and-bee 

Media contact: Hermann Pretorius IRR Head of Strategic Communications Tel: 079 875 4290 Email: hermann@irr.org.za

Media enquiries: Michael Morris Tel: 066 302 1968 Email: michael@irr.org.za