DA tells court VAT hike was pushed through illegally

The urgent application, brought by the DA and supported by the Economic Freedom Fighters (EFF), is being heard on Tuesday, just days before the increase from 15 to 16 percent is due to take effect on 1 May.

Both parties are asking the court to interdict the 0.5 percentage point increase, warning it will deepen the financial strain on already struggling households and accelerate food inflation.

Earlier this month, Parliament approved the fiscal framework by 194 votes, with support from the African National Congress, Inkatha Freedom Party, Patriotic Alliance, RISE Mzansi, and several smaller parties.

But the DA argues that the process followed in passing that part of the budget was unconstitutional and procedurally flawed.

Despite participating in the Government of National Unity, the DA says it cannot support what it sees as an unfair tax burden on ordinary South Africans.

Arguing on behalf of the DA, Advocate Michael Bishop SC rejected claims that the court challenge is about political defeat.

"This case isn’t about us losing in Parliament. Our argument is that Parliament followed an unlawful process and failed to take a valid decision on the fiscal framework, and by extension, the VAT increase. That’s why we’re here."

Adv. Bishop laid out three key points under Section 7.4 of the VAT Act that, according to the DA, should be central to the court’s assessment.

"First, the VAT increase is aimed purely at raising revenue, not regulating behaviour. That’s clear from the Minister’s affidavit, where he states that the increase reflects his judgment on how best to fund public goods.”

"Second, it is a common cause that VAT paid by consumers cannot be refunded. From 1 May, every rand paid in VAT will go directly into the National Revenue Fund and cannot be returned to consumers. 

That’s the nature of VAT, it's collected by vendors and paid to SARS. There’s no mechanism to reimburse millions of ordinary shoppers.

"Third, the Minister’s power under Section 7.4 can only be triggered during the annual budget speech, as outlined in the VAT Act. And unlike other tax statutes, the VAT rate is embedded directly in the Act,  not in a schedule or regulation.”

The DA maintains that such a significant tax change should be subject to full scrutiny and democratic oversight.

It wants the court to declare the VAT Act unconstitutional to the extent that it allows the Minister to make such decisions without prior approval from Parliament.

 The party wants the court to find the VAT Act unconstitutional, in so far as it enables the Minister to make such decisions unilaterally without prior parliamentary approval.

Bishop further criticised the lack of public engagement in the lead-up to the announcement.

"There is no public process before the VAT hike is announced. No draft is released for public comment. The Minister simply announces it, and it can come into effect the very next day. This is even more concerning than past cases like New Africa or Casino Association,  where there was at least some opportunity for public participation. Here, everything happens behind closed doors, and becomes law at the Minister’s say-so.”

The EFF, who filed an intervening application, have echoed concerns about both the substance and process of the VAT hike.

The Red Berets' Treasurer-General Omphile Maotwe insists the fiscal framework was unlawfully adopted.

"The committee did not make the recommendations required by section 8(5) of the Money Bills Amendment Procedure and Related Matters Act. No formal deliberations or vote took place before the report was tabled in the National Assembly. What was passed was not a lawful report, but a document pushed through in violation of the Constitution and the Money Bills Act.”

Maotwe said the EFF has taken a stand because Parliament can no longer serve as a mere rubber stamp for executive decisions.

"For too long, the legislative process has been abused by the ruling party to pass budgets without proper scrutiny, debate, or legal compliance. This undermines constitutional democracy and erodes accountability.”

The case continues, with the court expected to weigh the legality of the process as well as the potential socioeconomic impact of the proposed VAT increase.

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