WATCH | DA claims victory as finance minister backtracks on VAT increase

The DA has declared victory, saying the reversal of the VAT hike was a result of its opposition to an increase in the tax.

This after finance minister Enoch Godongwana dropped the 0.5 percentage point  hike which would have come into effect on May 1.

DA federal chair Helen Zille said the backdown followed sustained opposition by her party in the cabinet, in parliament and in court.

“From the outset, the DA has opposed this tax increase, highlighting its impact on already struggling South African households,” she said.

The party challenged the process by filing an urgent application in the Western Cape High Court to contest the constitutionality of the increase and procedural flaws in tabling it.

“This exposed the arbitrary power the minister of finance sought to wield in imposing the VAT hike. The approach by lawyers acting on behalf of the minister with a proposal for an out-of-court settlement to scrap VAT marks a critical turning point in this battle. It is now clear that the Treasury had no choice but to reverse its decision in the face of our relentless and strategic legal pressure,” said Zille.

The DA believes Godongwana's backtracking places emphasis on their arguments made in their court application, which accused the minister of exercising unconstitutional powers to impose or withdraw VAT unilaterally.

“While this represents a significant step towards stopping the VAT hike, the process is not yet complete. A final court order and a pronouncement on the validity of the fiscal framework by the speaker must still follow,” said Zille.

The DA revealed that it is awaiting a formal written settlement offer before responding to the minister’s request, and “will keep the public informed of developments”.

“Even Godongwana’s own court papers confirmed the intention to proceed with the VAT hike, and it was only the real prospect of losing in court, thanks to the DA’s exceptional legal team, that forced the Treasury into retreat.”

Zille said the Treasury’s retreat was not a reconsideration but “a retreat born of necessity in the face of likely legal defeat”.

Boasting that its legal action achieved the intended result, the DA said it had to stand firm to protect the public from the “consequences of a tone-deaf and anti-poor budget”.

“At every turn — from the cabinet table to the courtroom — we held the line. This underscores the power of the DA to effect change in a new context where there is no longer a majority party.”

Meanwhile, TimesLIVE reported last week that Godongwana “responded positively” to a proposal to amend the estimated revenue in his fiscal framework and include a projection that Sars will collect between R20bn and R60bn from its debtors between now and December.

This additional revenue is expected to give him room to offset the VAT increase, which has created friction in the GNU.

TimesLIVE