Unless a court intervenes, “every person in South Africa will pay increased taxes on goods that can never be recovered. And this will occur even though parliament has set its face against a VAT hike,” said the DA in court papers on Thursday.
The DA, in its urgent application to the Western Cape High Court, has asked the court to declare invalid and set aside parliament’s resolutions to accept the reports of two of its committees — the standing committee on finance and the select committee on finance.
“The decisions of the National Assembly and the National Council of Provinces to adopt the reports of the committees are unlawful and invalid,” said the DA’s Helen Zille in an affidavit.
The DA also wants an interim order from the court: to suspend the operation of the VAT increase, pending a full hearing later on, about whether section 7(4) of the VAT Act is constitutional. The DA says section 7(4) unconstitutionally gives the power to the minister to legislate — a power reserved for parliament — as it allows him to unilaterally change the VAT rate.
In her affidavit, Zille said the resolutions to adopt the committee reports were unlawful because the law required that the committees “accept or amend the fiscal framework and provide a clear statement to that effect”.
But this was never complied with, she said. Instead, during an eight-hour meeting on April 1, a final report was never put before the committee for adoption, she said. “Nor was the question ever directly posed to the committees whether they accepted or amended the fiscal framework.”
It was only after the meeting that a second draft was circulated, which contained a statement that recorded that the DA, MKP and EFF accepted the fiscal framework with amendments, she said. But the DA’s Henni Britz, who sat on the select committee, responded and specifically said the DA did not accept the framework, said Zille.
A third draft was circulated, which the DA still objected to, and then a fourth — on the day of the vote, she said. The fourth and final reports still contained “fundamental difficulties”, said Zille.
“Crucially, the most important part of the report — a clear statement about whether to adopt or amend the fiscal framework — was never formally considered by the committees ... This constitutes a fundamental and fatal procedural flaw,” said Zille.
She said the speaker of the National Assembly and the chairperson of the National Council of Provinces had been led to believe that the committees had voted to accept the fiscal framework. “The votes that followed in the respective Houses were premised on, and fatally infected by, this erroneous belief,” she said.
If there is genuinely no other option but to raise VAT — or any other alternative source of revenue — then that is a decision for parliament to make. There is nothing stopping parliament from adopting fiscal legislation quickly, if that becomes necessary.
— Helen Zille
Zille said the decision to adopt the fiscal framework was also based on a material error of law — because some MPs on the committees believed that a “non-binding” recommendation that the minister reconsider raising VAT would prevent it happening. This was a “misapprehension”.
Under the act, the minister may, “through mere announcement” in the annual budget, amend the VAT rate “for an entire year”.
“If parliament believes that the VAT hike will not happen because of its non-binding recommendations, it is mistaken. As of now, and as a matter of law, the VAT hike will go into effect on May 1 2025,” said Zille.
Zille said the VAT Act was also “patently unconstitutional”. Only parliament may amend legislation, she said.
While an alteration to the VAT rate is subject to parliament’s approval within 12 months, when it came to VAT, the increase would be “irreversible”.
“This is because of the nature of VAT as a tax,” she said. With other taxes, it may be possible for those unlawfully taxed to recoup what they had paid. But because of the nature of VAT, even if parliament were to later reject the VAT increase, the amounts already paid by consumers would be retained by the fiscus.
The harm done if the court did not urgently intervene would be irreversible: “It would simply be impossible for the state to repay everyone the 0.5% extra paid by them during the 12-month period.”
The minister’s decision was also an “abuse of his powers in law” because he was “aware that a majority of parliament does not support the tax increase and will not do so”.
Zille accepted that the government had to make hard choices about how to spend public finances, but the minister could not replace parliament on this score, she said.
“If there is genuinely no other option but to raise VAT — or any other alternative source of revenue — then that is a decision for parliament to make. There is nothing stopping parliament from adopting fiscal legislation quickly, if that becomes necessary,” she said.
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