Finance Minister Enoch Godongwana says the consequences for the country would be 'severe and far-reaching' if the proposed VAT hike is halted. (Photo: Jairus Mmutle / GCIS) 
Should the 0.5 percentage point value-added tax (VAT) increase, announced by Minister of Finance Enoch Godongwana on 12 March, be suspended, Godongwana says the consequences for the country would be “severe and far-reaching”.
Responding to the DA and EFF’s applications to prevent the VAT increase from coming into effect on 1 May 2025, Godongwana has defended his decision to increase the VAT rate in terms of section 7(4) of the VAT Act.
He said that the 2025/26 Budget was based on the assumption that the 0.5 percentage point VAT increase would generate about R13.5-billion additional revenue for this financial year.
“If the rate increase is halted now, that revenue will be lost, and the state will be left without the funds needed to meet already-budgeted spending commitments,” Godongwana said in his responding affidavit.
“The major point is this: if the government is denied the ability to raise the additional revenue through the VAT rate adjustment (and section 7(4) is ultimately upheld as constitutional, which I respectfully submit is likely), the government and the public will suffer immense and unnecessary prejudice.”
Following the adoption of the fiscal framework by the National Assembly and the National Council of Provinces (NCOP), DA Federal Council chairperson Helen Zille filed an application in the Western Cape Division of the High Court on 3 April, challenging the legality of the process by Parliament to adopt the fiscal framework, and Godongwana’s powers under VAT Act.
The EFF has since applied to intervene in the DA’s case.
Read more: How the DA and EFF plan to fight the VAT hike and Budget process in court
The DA and the EFF are both seeking final relief from the court declaring the resolutions of the National Assembly and the NCOP to adopt the report of the standing committee on finance and select committee on finance on the fiscal framework, invalid and set aside.
The DA is also seeking an order suspending Godongwana’s announcement made in his Budget speech on 12 March to increase the VAT rate on 1 May, and an interdict preventing the South African Revenue Service (SARS) from implementing his decision.
The DA is also arguing, in Part B of its application, that the finance minister’s authority under section 7(4) of the VAT Act unconstitutionally permits the executive to raise taxes without Parliament’s approval.
DA’s challenge to section 7(4) is ‘misdirected’
Godongwana argues that the DA’s challenge to section 7(4) of the VAT Act is “misdirected” and based on a “fundamental misinterpretation” of the law.
He argues that section 7(4) does not allow him to change the law permanently.
“First, the DA submits that section 7(4) permits the Minister of Finance to amend section 7(1) of the VAT Act. This is plainly wrong. The provision does not confer on the Minister of Finance the power to amend section 7(1). Instead, it grants me temporary and conditional authority to adjust the rate for 12 months, subject to Parliament’s power to enact legislation. When I, as the Minister of Finance, announce the alteration, section 7(1) remains the same and continues to exist until amended by Parliament. There is no legislative amendment,” his responding affidavit reads.
The DA argues in its papers that Godongwana’s authority under section 7(4) of the VAT Act unconstitutionally grants him plenary legislative powers, that Parliament may not delegate to the executive.
Gondongwana responds that, even if section 7(4) were to be treated as conferring plenary power, the courts have held that such a delegation can be constitutional depending on the context.
“Second, the DA argues that section 7(4) is unconstitutional because it allegedly allows the Minister to impose an irreversible tax. It contends that only elected representatives may raise taxes, and that any delegation of this function to a member of the executive is impermissible… This blanket proposition is legally incorrect and should be rejected on that basis alone,” he said.
Godongwana further rejects the DA’s argument that, even if section 7(4) is constitutionally valid, his decision of 12 March to increase the VAT rate is reviewable, if he knew Parliament wouldn’t support the legislative amendment. He believes Parliament will support the VAT increase as a “responsible” fiscal move.
“While I accept that tax increases are politically difficult, I believe that, when the proposed amendment to section 7(1) is debated, a majority in Parliament will support it as a responsible and necessary fiscal step.
“The conduct of the DA itself demonstrates this. Prior to me making the announcement, discussions were held with political parties forming part of the Government of National Unity on the possibility of a VAT increase. During those discussions, the DA, currently the second-largest political party in the National Assembly, indicated that it was open to a 0.5 percentage point increase in the VAT rate, subject to certain conditions, not relevant to this application, being met. This demonstrates that the DA is not, in principle, opposed to a VAT increase,” his responding affidavit reads.
Additionally, he argues that the fact that Parliament may, ultimately, take a different view on the VAT increase, does not render his announcement invalid.
“Section 7(4) is designed precisely to allow the executive to act immediately, and for Parliament to decide later whether to give that decision permanent effect (and, if not, to make a different decision to ensure fiscal balancing as required by the Money Bills Act),” Godongwana said.
Scrapping VAT would have ‘severe’ consequences
Godongwana opposes the DA’s request for the interim relief, arguing that “significant and immediate harm” would occur if his decision to increase VAT was suspended.
“The consequences would be severe and far-reaching. Government would be immediately forced either to cut expenditure or to increase borrowing. Both options carry risks. Spending cuts would likely fall on essential education, healthcare, housing, and social protection programmes. These disproportionately affect the poor and vulnerable. Increased borrowing would further strain the fiscus, undermine investor confidence, and increase the cost of public debt,” he continued.
According to Godongwana, the DA’s argument that the public would suffer irreparable harm if the VAT increase was implemented, was unsupported. In sharp contrast, he argued, there would be “severe harm” to the fiscus if the VAT increase did not go into effect on 1 May.
“Finally, the DA is not without remedy. It may pursue the relief sought in Part B of its notice of motion and, if successful, to ask the Court for any just and equitable relief it deems appropriate. There is no need to grant interim relief now. The balance of convenience overwhelmingly favours refusing the interim interdict,” he said.
‘The EFF’s position is unsupported’
Godongwana said the EFF’s legal action to stop the VAT hike was misplaced and “unsupported”.
“It is unclear whether the EFF seeks merely to interdict the report (which so happens to make reference to a VAT rate increase) or whether the EFF seeks to interdict ‘the introduction of the 0.5 percentage points value-added tax increase’. That relief would be moot. The decision to introduce the VAT rate increase has been made. My decision to introduce the VAT rate change cannot be interdicted at this stage. I note that, unlike the DA, in their notice of motion, the EFF does not seek the suspension of my announcement. Neither is this addressed in their founding affidavit,” he said.
Godongwana said the view that his announcement of a VAT increase was unlawful because of an alleged unlawful adoption of the fiscal framework “has no legal basis”.
“Section 7(4) of the VAT Act empowers the Minister of Finance to make a temporary VAT rate adjustment at the time of the national annual budget. I exercised that power on 12 March 2025. Even if one assumes the subsequent adoption of the fiscal framework was flawed (a contention I dispute), that is unrelated to the lawfulness of my earlier announcement under section 7(4) of the VAT Act. The announcement continues to exist and has legal effect,” he argues. DM