VAT’s enough — Godongwana’s powers under scrutiny in high court challenge

Advocate Michael Bishop, leading the DA's Case and being heard by judges Mabinda-Boqwana, Le Gange and Savage, during an urgent application to halt a VAT increase at Western Cape High Court on April 22, 2025 in Cape Town, South Africa. The Democratic Alliance (DA) and the Economic Freedom Fighters (EFF) are challenging the legality of the hike, announced as part of the revised fiscal framework. (Photo by Gallo Images/ER Lombard)

By Victoria O’Regan

23 Apr 2025

The finance minister’s power to adjust the VAT rate before Parliament has approved it came under scrutiny in the Western Cape Division of the High Court on Tuesday.

The power given to the minister of finance to increase the value-added tax (VAT) rate in terms of section 7(4) of the VAT Act is an “unconstitutional power”, because only the legislature has the authority to raise taxes, the Western Cape Division of the High Court heard on Tuesday.

“Our fundamental case, particularly with regard to section 7(4) of the VAT Act, is that that is not a decision for the minister or National Treasury to make. It is a decision for Parliament to make,” advocate Michael Bishop, representing the DA, told the court.

The high court heard the urgent application brought by the DA and EFF to halt the implementation of the 0.5 percentage point VAT increase on 1 May, as announced by Finance Minister Enoch Godongwana in his 12 March Budget speech.

The DA wants an interim order suspending Godongwana’s decision to raise the VAT rate, pending Part B of its application in which it argues that the finance minister’s authority under section 7(4) of the VAT Act is unconstitutional because it grants him the power to raise taxes which, in terms of the Constitution, lies solely with the legislature.

A full bench of judges, consisting of Western Cape Judge President Nolwazi Mabindla-Boqwana and judges Kate Savage and Andre le Grange, presided over the matter.

Read more: Court battle unfolds as DA and EFF unite against controversial VAT increase

“The DA’s case is about who decides whether to increase the VAT rate, and ensuring that that entity – Parliament – does so lawfully. The VAT increase may be a good idea or a bad idea but VAT can only be increased when Parliament does it after following a lawful process – that is our case,” said Bishop.

However, he argued that Parliament has “not lawfully endorsed” the VAT increase.

“Parliament rejected an unconditional VAT hike. The only VAT hike that Parliament approved when it considered the fiscal framework was a conditional one, in the sense that it was conditional on the consideration of further alternatives and a vote in Parliament on whether to adopt those alternatives. So Parliament has not endorsed this VAT hike. The decision that Parliament did take was an unlawful decision,” he said.

Bishop argued that several judgments of the Constitutional Court held that only democratically elected representatives could decide to increase the tax rate, not the minister of finance.

VAT court DA EFF Advocate Michael Bishop, leading the DA’s case against the VAT increase in the Western Cape High Court 22 April 2025. (Photo: Gallo Images / ER Lombard)

The minister and National Treasury had a “proposing role”, but the “decision-making role” always rested with Parliament.

Daily Maverick has reported that section 7(4) of the VAT Act states that if the minister makes an announcement determining that the VAT rate is to be altered, that alteration would come into effect on a date determined by him, and would apply for 12 months subject to Parliament passing legislation giving effect to that announcement.

Read more: After the Bell: The legal Budget brawl just got real

“VAT increase is immediate and irreversible. It comes into effect before Parliament acts and it cannot be undone after Parliament acts,” said Bishop.

He said the party was not asking the court to declare, on Tuesday, section 7(4) unconstitutional. “But we submit… that when we get to Part B, the prospects that we will win Part B are extremely high,” he said.

Unconstitutionality ‘non-existent’

However, advocate Mahlape Sello, representing Godongwana, argued that the DA’s case does not have prospects of success because the unconstitutionality it argues for is “non-existent”.

She argued that section 7(4) was, in fact, not unconstitutional because although the minister can adjust the VAT rate, it is still an amendment subject to the approval of Parliament.

Le Grange asked what would happen if, come 1 May, Parliament had come to the conclusion that the VAT rate should not be increased by 0.5 percentage points. Sello replied that the 0.5 percentage point increase in VAT as announced by the minister applies until such time that Parliament enacts legislation amending it.

Read more: The Budget brouhaha and you — wallet pressure, service strain and the price of political paralysis

“What’s happening is that the executive has taken over the power of the legislature, even if it’s for a month. Can that be tolerated under our constitutional order?” asked Le Grange.

Sello replied: “Indeed… We submit that it can be tolerated and it must be tolerated, because section 7(4) delegates that power, for a limited period, and subjects the exercise of that power to parliamentary oversight.

“What is happening in section 7(4) is not unconstitutional.”

‘Elements of deception’

Both the DA and the EFF argued that the processes followed in the marathon session of Parliament’s finance committee when it considered the fiscal framework, were procedurally irregular and unlawful.

Tembeka Ngcukaitobi, representing the EFF, further accused Godongwana of being deceitful in creating the impression in Parliament that his increase in the VAT rate could be changed, when he knew it could not be reversed.

“The process through which the VAT increase was adopted is itself irrational and unconstitutional – in fact it has elements of deception,” he said.

“That is an improper use of public power.

“The deception is the idea that this is subject to change, when they knew they had no intention of changing it – that is deceptive,” he said.

Ngcukaitobi quoted comments by ActionSA’s parliamentary leader, Athol Trollip, on the party’s support for the fiscal framework being conditional on Godongwana scrapping the VAT hike and considering alternatives to it. ActionSA, along with Bosa and Rise Mzansi, came to the rescue of the ANC to pass the fiscal framework in Parliament, on condition that alternatives to the VAT increase were found within 30 days.

Read more: Take VAT! GNU comes unstuck as fiscal fracas plays out in National Assembly

However, Ngcukaitobi argued that in Godongwana’s responding affidavit he makes it clear that the VAT increase was never subject to change.

“It is him [Trollip] who said the minister has misrepresented the truth, so I say that the minister is guilty of deception.

“Once you have a budgetary process that is so coloured by deception it is fundamentally in breach of the duties imposed on members of Parliament, especially our national executive. You cannot endorse a Budget process where the deception is so clear.”

Sello denied that Godongwana deceived MPs.

“There was no deception. What the EFF relies upon is what Mr Trollip of ActionSA supposedly communicated to the public as to what the minister said. The minister in his affidavit denies that those were his statements, and in fact… he doesn’t assume responsibility for any misunderstanding that Mr Trollip may have belaboured under,” she said.

Judgment was reserved in the case, to be delivered on or before 29 April. DM

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Unconstitutionality ‘non-existent’

‘Elements of deception’