Huge changes to VAT laws in South Africa
The Western Cape High Court has declared a major part of the Value-Added Tax (VAT) Act unconstitutional, finding that tax changes cannot be determined solely by the National Executive.
Last year, South Africa’s National Budget descended into chaos when Finance Minister Enoch Godongwana announced an increase in the VAT rate from 15% to 17%.
The Minister decided not to table the initial Budget, but in his second Budget, he increased the VAT rate to 16%.
The high court then heard an urgent application by the DA and the EFF to set aside the adoption of the Fiscal Framework by the National Assembly and the National Council of Provinces.
Negotiations with other GNU members and the urgent court ruling prevented the increase from going through. The subsequent third attempt went through Parliament with no VAT increases.
However, the matter has now spilt into 2026, with the Western Cape High Court declaring section 7(4) of the VAT Act unconstitutional.
Section 7(4) of the Act states that if the Minister announces that the VAT rate is to be altered in the National Budget, the alteration becomes effective from a date determined in the announcement and continues to apply for 12 months.
The altered rate thus derived immediate legal force from an executive announcement, with Parliament subsequently deciding whether to confirm it through legislation.
The DA said that the ruling confirms its argument that the power to determine taxes cannot be delegated to the executive.
The DA’s argued that only Parliament can change the VAT rate via due process, and that the Minister of Finance cannot raise VAT unilaterally.
“The court found that allowing the Minister of Finance to unilaterally alter the VAT rate through a budget announcement amounts to an impermissible delegation of legislative authority,” said the DA’s Helen Zille.
“Taxation powers, the judgment affirmed, must remain firmly in the hands of Parliament as the elected representatives of the people.”
Godongwana and SARS Commissioner Edward Kieswetter were also ordered to pay the DA’s costs in the court application.
The court has now suspended the declaration of invalidity for 24 months to allow Parliament time to correct the issues in the law. The ruling can be found below:
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