- Parliament has been given two years to change the VAT Act in a ruling that follows last year’s value-added tax spat that nearly split the government of national unity.
- Limits must be imposed on the minister of finance’s power to change value-added tax since the act as it stands is “invalid”, a court found.
- The fact that VAT increases can’t be reversed, played a role in the decision.
- For more financial news, visit News24 Business.
A year after 2025’s Budget bungle over a proposed increase to value-added tax (VAT), the DA has scored a court victory that will curtail the power of the minister of finance.
However, the Western Cape High Court did not go as far as the DA had argued for, namely, to impose an absolute veto on the minister’s power. Rather, the court said the law must be refined to limit his power.
Judges Judith Cloete, James Lekhuleni and Matthew Francis declared that Section 7(4) of the VAT Act, which gives the minister the unilateral right to change VAT rates, was “inconsistent” with the Constitution and “invalid”.
The judges found that delegating authority to the executive is permissible, but the absence of “express statutory criteria governing the magnitude of the alteration” constituted “an impermissible delegation of legislative power to the executive.”
Parliament has been afforded two years to change the VAT Act, during which time the section in question will remain in place.
The minister of finance and the Commissioner of the SA Revenue Service, as first and second respondents, have to carry the cost of the court case.
VAT showdown
As Section 7(4) stands, the minister of finance has the power to announce VAT alterations in the national Budget in February, which will come into effect immediately – subject to Parliament passing the necessary legislation within 12 months.
The DA brought its case after the 12 March 2025 Budget, which proposed an increase of half a percentage point in the VAT rate, from 15% to 15.5% in 2025, and another increase, to 16% in 2026.
The first Budget, due to be tabled on 26 February, would have proposed an increase of 2 percentage points, which would have taken the rate to 17%. It was aborted minutes before Finance Minister Enoch Godongwana was due to deliver his address after parties in the government of national unity objected.
Budget 3.0 was submitted on 21 May 2025, and finally passed Parliament after dropping all proposed VAT hikes.
The DA’s case rested on the pillar that the Constitution reserves the power to impose or change taxes exclusively to Parliament. The DA argued that even if safeguards were imposed, any delegation was impermissible.
The respondents distinguished between the delegation of the power to impose a new tax, and the delegation of the power to alter the rate of an existing tax, arguing that the latter was permissible.
The judges slammed the minister’s argument that the purpose of Section 7(4) was to ensure “sound fiscal management” rather than merely raising revenue, saying this argument “does not withstand scrutiny”.
However, they agreed with precedents set in previous court cases that there is no absolute prohibition on the delegation of authority to the executive, tempering the DA’s case somewhat.
The power to change VAT is a “significant power”: “[VAT] directly affects the tax burden borne by every consumer of goods and services in South Africa,” said the court. It ruled the power needed to be limited.
“The minister’s discretion is, on the face of the provision, unfettered. There is no statutory cap on the extent of the increase or decrease. “There is no statutory guidance on the circumstances in which the power may be exercised, beyond the requirement that the announcement be made in the national annual Budget.
“We accept, as the respondents submitted, that the exercise of the power is subject to the principle of legality and the requirement of rationality. But these are background constitutional constraints that apply to all exercises of public power. They do not compensate for the absence of specific, statutory constraints on the delegated power itself.”
The judges argue that VAT increases are, in practice, irreversible, even if Parliament currently has the power to reject increases within 12 months.
“This is a meaningful check, but it is an ex post check. It operates after the tax has already been imposed and collected. The irreversibility of VAT – a feature emphasised repeatedly by the DA – means that even if Parliament withholds approval, the public cannot recover the tax paid during the 12-month period.”
Parliament must now set statutory limits to the minister’s powers.
“We have concluded that the constitutional defect lies not in the concept of delegated rate-setting authority as such, but in the breadth and structure of the delegation in its present form — in particular, the absence of defined statutory constraints and prompt parliamentary ratification,” said the court.
“It is for Parliament to determine how best to recalibrate the mechanism, whether – for example – by introducing quantitative limits, requiring approval within a defined period, or adopting some other constitutionally compliant design.”
Helen Zille, chairperson of the DA Federal Council, welcomed the judgment, saying: “This ruling vindicates our constitutional challenge and reinforces that there can be no taxation without proper parliamentary oversight. It is a case of ‘No taxation without representation’ – Parliament is the representation of voters, and must be the decision-maker on taxation.”
She said the DA will continue to fight on behalf of South Africans against attempts to bypass democratic oversight in decisions that directly affect the cost of living.
