Western Cape High Court reserves judgment on controversial VAT increase
- admin74420
- Apr 24
- 2 min read
The Western Cape High Court has reserved its decision on a case challenging a VAT increase in South Africa. The case was brought jointly by the Democratic Alliance (DA) and the Economic Freedom Fighters (EFF) . The court is expected to deliver its decision on Tuesday, April 29, 2025.
Background of VAT increase
South African Finance Minister Enoch Godongwana announced in the 2025 Budget that the VAT rate will be increased in two stages:
The first phase will be a 0.5% increase starting from May 1, 2025 .
In the second phase, the interest rate will be increased by another 0.5% starting from April 1, 2026 .
The final tax rate will rise from 15% to 16%. According to the Treasury Department's estimates, this will bring in additional tax revenue of approximately R13.5 billion in the 2025/26 fiscal year.
DA and EFF legal challenge
The DA and EFF consider the VAT hike unconstitutional , pointing out that only Congress has the power to levy taxes, not the executive branch. They argue that the process bypassed the proper legislative process because the fiscal framework report was not formally voted on in Congress.
DA's legal representative Michael Bishop argued that the power to levy taxes should be limited to Parliament and that any tax increase must follow legal procedures. EFF's representative lawyer Tembeka Ngcukaitobi pointed out that the VAT increase was a regressive measure that was detrimental to the poor and accused the government of misleading the public into believing that the tax increase could be revoked before it was implemented.
The government's defense
Lawyer Mahlape Sello , who represented the finance minister, said the minister was acting in accordance with Section 7(4) of the VAT Act, which allows for temporary adjustments to the VAT rate within 12 months, subject to parliamentary approval.
She warned that if the VAT increase was stopped at this time, it would undermine the overall fiscal framework and delay the passage of the budget by Congress, which could result in the government having no executable budget.
Economic Perspective
Economist Dawie Roodt pointed out that the South African Revenue Authority actually collected nearly 10 billion rand in taxes than expected in the last fiscal year, so he believes that there may be no need to increase the VAT rate at all.
Next Steps
The court will rule on April 29 on whether the VAT increase will be implemented as scheduled on May 1. The ruling will have far-reaching implications for South Africa's fiscal policy and the distribution of power between the executive and legislative branches.
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