Outcome of VAT increase interdict application due next week

THE DA and the EFF will know next Tuesday the outcome of their application to interdict the VAT increase from taking effect on May 1. 

Having heard arguments from the parties who also want to set aside the fiscal framework report adopted by Parliament last month, Western Cape High Court Judge President Nolwazi Mabindla-Boqwana said the parties would be notified if a judgment will be issued earlier.

“We do understand that it is a complex issue but it must be decided as soon as possible. We will do our best to give judgment at the latest on the 29th, which is next week Tuesday.”

The DA's legal representative Advocate Michael Bishop told the full bench on Tuesday that the case before court was about who decides to increase the VAT rate and whether Parliament acted lawfully.

“It can only be increased after Parliament does it after following a lawful process. It is about making sure democratically elected public representatives of South Africa decide that issue, not the minister.”

Bishop said the announcement by Finance Minister Enoch Godongwana to increase the VAT rate by 0.5% in 2025-26 was premised on the fact that the minister determines the funding needs.

“That is not a decision for the Minister or the National Treasury. It is a decision for Parliament to make. The decision making role is always with Parliament, how much to raise and how to raise and spend it,” he said.

Bishop told the court that the draft fiscal report of the standing committee on finance did not include a statement on whether it was accepted or rejected.

“There was just never an actual vote on the fiscal framework as it stands. It has never been to a vote,” he said.

Addressing the court, the EFF's legal representative, Advocate Tembeka Ngcukaitobi said the VAT increase was substantively unconstitutional and the process through which it was adopted was irrational and unconstitutional.

“It has elements of deception,” Ngcukaitobi said on the impression created that the VAT increase will be amended after it comes into effect on May 1.

“It may be politically convenient but public power should not be used deceptively,” he said,

Ngcukaitobi also said the standing committee on finance took a view on VAT that was a regressive measure.

 Advocate Mahlape Sello, representing Godongwana, said his affidavit dealt with matters the EFF raised on deception, saying the party relied on statements made by ActionSA.

“The minister denies those were his statements,” she said.

Sello also said the claims of unconstitutionality on Godongwana’s power to increase Vat were non-existent.

She also said while VAT will be increased on May 1, it was subject to an eventual decision by Parliament.

“Our constitutional provision allows the Minister to make necessary adjustments, subject to parliamentary oversight.”

Sello asked the court, when deciding on the application to interdict the VAT increase, to assess the impact the relief will have.

“The disruption will be entire, the fiscal framework will have to be returned to the Minister to consider another means of addressing the deficit in the budget,” she said.

Advocate Karrisha Pillay, for Parliament, said the court was tasked to determine the process followed, whether it was lawful and met legislative prescripts.

“Whatever political parties say in the space of politics ought to be areas that the court does not draw inferences from,” she said.

Cape Times