DA continues court challenge against VAT increase despite settlement offer

IOL News

24-04-2025

The Democratic Alliance will continue with its application to have the power given to Finance Minister Enoch Godongwana to decide on VAT without ratification of Parliament declared unconstitutional.
Image: Armand Hough / Independent Newspapers
DA Federal Council chairperson, Helen Zille, said on Thursday her party will proceed with its legal challenge regarding the constitutional validity of Finance Minister Enoch Godongwana's powers to raise VAT despite the latter's out of court settlement offer.
Speaking to the media in the morning, Zille said the Part B application would move forward, regardless of any out-of-court settlement discussion with Godongwana.
She said the power to raise tax was conferred to the Parliament, not the minister.
'Only Parliament can raise taxes. It is a power that can't be delegated to a minister. We will continue with Part B of our application,' she said.
Zille also said the DA has yet to receive formal settlement out of court settlement offer from Godongwana.
'The minute we see it, we will know what he is asking for and what we will not do is not to withdraw Part B of our application. It is important get to the order of the court that only Parliament can raise taxes,' she told the journalists.
Godongwana announced his decision to introduce the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill, which proposes to maintain the Value-Added rate at 15 per cent from 1 May 2025, instead of the proposed increase to VAT announcement in the Budget in March, two days after the court heard an application by the DA and EFF.
Godongwana said the decision to forego the increase followed extensive consultations with political parties, and careful consideration of the recommendations of the parliamentary committees.
'By not increasing VAT, estimated revenue will fall short by around R75 billion over the medium term. As a result, the Minister of Finance has written to the Speaker of the National Assembly to indicate that he is withdrawing the Appropriation Bill and the Division of Revenue Bill, in order to propose expenditure adjustments to cover this shortfall in revenue.'
National Treasury said Parliament will be requested to adjust expenditure in a manner that ensures that the loss of revenue does not harm South Africa's fiscal sustainability.
'The decision not to increase VAT means that the measures to cushion lower income households against the potential negative impact of the rate increase now need to be withdrawn and other expenditure decisions revisited.
'To offset the unavoidable expenditure adjustments, any additional revenue collected by SARS may be considered for this purpose going forward.'
The National Treasury said it will consider the proposals put forward as potential amendments in upcoming budgets as mechanisms to increase the resources available.
While the national Treasury's statement was mum on the proposed out of court settlement with the DA, Zille said it came as a surprise very late last night on Wednesday their lawyers informed her they had been approved for a settlement offer by Godongwana's lawyers.
She said it was less than a week Godongwana stated in the answering affidavit that the would increase the VAT on May 1.
'What happened between last Thursday and yesterday was DA challenge heard in court on Tuesday… I have no doubt his legal team went to him yesterday to say it looks inevitable the VAT increase could well be set aside by the court,' she said.
Zille also said her party would check for necessary spending reviews.
'There is still quite a battle to run from this point onwards.'
She said they expected Godongwana to make a formal out of court settlement offer and they will respond through their lawyers.
Zille also noted that there was no precedence to their court case.
'We believe a court can set aside Parliament's acceptance of fiscal framework if it was unlawful and irrational,' she said, adding that they did not know which path was to be followed.
"There were two main respondents in our case. Number one was the minister and obviously the National Treasury and two was Parliament,' she said.
'We have to seek a settlement agreement with both before we can say we have beaten this VAT increase. So it's important for us to say that while victory is a nose length away, we still have to cross the finishing line," Zille said.
Asked about the DA's stay in the Government of National Unity, Zille said it was not her position to say under what circumstances the GNU should continue.
'I can't categorically answer now. A lot will depend on what happens today.'
Zille also said the ANC, which held its press conference with smaller parties that voted for the fiscal framework, cancelled their meeting that was scheduled for 11am.