Godongwana agreed to the suspension and to an out-of-court settlement which was made an order of court
27 April 2025 - 20:15
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The Western Cape High Court handed down a court order on Sunday that suspends the 0.5 percentage point VAT increase announced by finance minister Enoch Godongwana, pending the passing of legislation regulating the VAT rate by parliament or the final determination of whether the VAT Act is constitutional or not.
This applies both to the 0.5 percentage point VAT increase due to come into effect on May 1 and the second 0.5 percentage point increase due to come into effect on April 1, 2026.
Godongwana agreed to the suspension and to an out-of-court settlement which was made an order of court.
The court order puts an end to weeks of uncertainty as the fate of the VAT increase and how to fill the fiscal hole its annulment would mean was debated between political parties. Opposition parties rejected it.
The court order also sets aside the adoption by the National Assembly and the National Council of Provinces of the report of the standing and select committees of finance of the fiscal framework.
The order said the DA has the right to continue with its application to have the VAT Act declared unconstitutional and said Godongwana must pay 50% of the costs of the DA and of the EFF with the other 50% being paid by the Speaker of the National Assembly Thoko Didiza and Chairperson of the National Council of Provinces Refilwe Mtsweni-Tsipane.
DA federal council chairperson Helen Zille said in a statement that the court’s decision “ensures that any changes to the VAT rate must be properly approved by parliament before taking effect, and sets aside the unlawful support lent to this VAT hike by a number of parties.
“We are pleased that the minister of finance eventually came back to the table and agreed to suspend the VAT increase in a lawful manner. This shows that government decisions cannot be made without proper oversight. It also gives South Africans certainty that changes affecting their pockets will not happen without the necessary checks and balances in place.”
National Treasury said in a statement that Godongwana “welcomes the court order, as it is entirely consistent with his announcement on 23 April 2025 to suspend the VAT increase.
“Minister Godongwana maintains that his initial budget proposal of 12 March 2025 was constitutional and appropriate given the limited options available to balance fiscal sustainability with service delivery needs.
“However, recognising that the proposal no longer enjoyed sufficient parliamentary support to pass into law, he made the decision to withdraw it.”
In his responding affidavit Godongwana argued the proposed VAT increase was considered less detrimental to economic growth and employment than alternatives examined by National Treasury.
Treasury said the withdrawal of the VAT increase creates a medium-term revenue shortfall of about R75bn necessitating decreased government expenditure with likely affects on service delivery.
“The minister welcomes the clarity and certainty provided by the court and order. Equally, he remains committed to fiscal responsibility and will pursue alternative measures to ensure sustainable public finances,” the statement said.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
VAT increase suspended by high court
Godongwana agreed to the suspension and to an out-of-court settlement which was made an order of court
The Western Cape High Court handed down a court order on Sunday that suspends the 0.5 percentage point VAT increase announced by finance minister Enoch Godongwana, pending the passing of legislation regulating the VAT rate by parliament or the final determination of whether the VAT Act is constitutional or not.
This applies both to the 0.5 percentage point VAT increase due to come into effect on May 1 and the second 0.5 percentage point increase due to come into effect on April 1, 2026.
Godongwana agreed to the suspension and to an out-of-court settlement which was made an order of court.
The court order puts an end to weeks of uncertainty as the fate of the VAT increase and how to fill the fiscal hole its annulment would mean was debated between political parties. Opposition parties rejected it.
The court order also sets aside the adoption by the National Assembly and the National Council of Provinces of the report of the standing and select committees of finance of the fiscal framework.
The order said the DA has the right to continue with its application to have the VAT Act declared unconstitutional and said Godongwana must pay 50% of the costs of the DA and of the EFF with the other 50% being paid by the Speaker of the National Assembly Thoko Didiza and Chairperson of the National Council of Provinces Refilwe Mtsweni-Tsipane.
DA federal council chairperson Helen Zille said in a statement that the court’s decision “ensures that any changes to the VAT rate must be properly approved by parliament before taking effect, and sets aside the unlawful support lent to this VAT hike by a number of parties.
“We are pleased that the minister of finance eventually came back to the table and agreed to suspend the VAT increase in a lawful manner. This shows that government decisions cannot be made without proper oversight. It also gives South Africans certainty that changes affecting their pockets will not happen without the necessary checks and balances in place.”
National Treasury said in a statement that Godongwana “welcomes the court order, as it is entirely consistent with his announcement on 23 April 2025 to suspend the VAT increase.
“Minister Godongwana maintains that his initial budget proposal of 12 March 2025 was constitutional and appropriate given the limited options available to balance fiscal sustainability with service delivery needs.
“However, recognising that the proposal no longer enjoyed sufficient parliamentary support to pass into law, he made the decision to withdraw it.”
In his responding affidavit Godongwana argued the proposed VAT increase was considered less detrimental to economic growth and employment than alternatives examined by National Treasury.
Treasury said the withdrawal of the VAT increase creates a medium-term revenue shortfall of about R75bn necessitating decreased government expenditure with likely affects on service delivery.
“The minister welcomes the clarity and certainty provided by the court and order. Equally, he remains committed to fiscal responsibility and will pursue alternative measures to ensure sustainable public finances,” the statement said.
ensorl@businesslive.co.za
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