The Western Cape High Court has found a section of the Value-Added Tax Act, which empowers finance minister Enoch Godongwana to amend the VAT rate, unconstitutional.
“It is declared section 7(4) of the Value-Added Tax Act 89 of 1991 is inconsistent with the Constitution and invalid,” the court judgment reads.
The full bench suspended the order for 24 months to afford parliament an opportunity to correct the defect. The order needs confirmation from the Constitutional Court.
The constitution stipulates the high court may make an order concerning the constitutional validity of an act, but an order of constitutional invalidity has no force unless it is confirmed by the ConCourt.
Godongwana was taken to court by the DA, the ANC ’s biggest government of national unity partner, challenging the VAT Act and arguing it gives the finance minister the power to change the VAT rate for an entire year without parliament’s approval.
The DA argued section 7(4) delegates to Godongwana the power to impose, increase or reduce a national tax, a power the constitution vests exclusively in parliament and that cannot be delegated to the executive.
Section 7(4) constitutes an impermissible delegation of legislative power to the executive. It is inconsistent with the constitution and invalid
— High court judgment
“If the minister makes an announcement in the national annual budget that the VAT rate specified in this section is to be altered, that alteration will be effective from a date determined by the minister in that announcement, and continues to apply for a period of 12 months from that date, subject to parliament passing legislation giving effect to that announcement within that period of 12 months,” the DA argued.
While delivering the national budget in March last year, Godongwana announced an alteration to the VAT rate to increase from 15% to 15.5% with effect from May 2025, and a further increase to 16% with effect from April 1 2026. Godongwana halted the increase after pushback from political parties.
In April 2025 the high court heard the urgent application by the DA and the EFF to set aside the resolutions by the National Assembly and the National Council of Provinces to accept the report of the standing committee on finance and the select committee on finance in respect of the 2025 fiscal framework.
After the hearing of the DA and EFF applications by the high court, Godongwana said he would shortly introduce the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill (Rates Bill), which proposed retaining the VAT rate at 15% from May 1 2025 instead of the proposed increases announced in his budget.
The minister gave notice that the Rates Bill would be introduced in the National Assembly, providing for, among other things, the reversal of the VAT rate increase announced in terms of section 7(4) of the VAT Act.
The full bench found section 7(4) constitutes an impermissible delegation of legislative power to the executive
Central to the litigation was whether Godongwana is an appropriate person to set the tax rate.
The full bench found section 7(4) empowers the minister to alter the VAT rate, describing it as a significant power. “We therefore hold that section 7(4) constitutes an impermissible delegation of legislative power to the executive. It is inconsistent with the constitution and invalid,” the judgment reads.
“It directly affects the tax burden borne by every consumer of goods and services in South Africa. It is not a power to make minor, technical adjustments; it is a power to change the central charging provision of the VAT Act.”
The court found the provision gives the minister unfettered power.
“There is no statutory cap on the extent of the increase or decrease. There is no statutory guidance on the circumstances in which the power may be exercised, beyond the requirement that the announcement be made in the national annual budget.”
The full bench found section 7(4) constitutes an impermissible delegation of legislative power to the executive.
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