Finance Minister Enoch Godongwana (through counsel for the Minister, National Treasury, and the South African Revenue Service) argued before the Constitutional Court that section 7(4) of the Value-Added Tax Act 89 of 1991 remains a constitutionally permissible mechanism allowing the Minister to announce an alteration to the VAT rate in the national Budget speech, with the change taking effect from a date he determines and remaining in force for up to 12 months pending parliamentary legislation. The apex court heard the matter on Thursday (27/28 August 2026) and reserved judgment.
This hearing arises from the Democratic Alliance’s successful challenge in the Western Cape High Court. In March 2026 a full bench (Cloete J, Francis J and Lekhuleni J) declared section 7(4) inconsistent with the Constitution and invalid. The provision had enabled the Minister, by simple announcement in the Budget, to alter the rate in section 7(1). The High Court suspended the declaration of invalidity for 24 months to give Parliament time to remedy the defect and referred the order to the Constitutional Court for confirmation under section 172(2)(a) of the Constitution.
Background to the dispute
The litigation traces to the fraught 2025 Budget process. In the initial (later revised) Budget, Godongwana proposed raising VAT from 15% to 15.5% with effect from May 2025 and to 16% from April 2026. Political resistance within the Government of National Unity, public pressure, and court challenges by the DA (and initially the EFF) led to the withdrawal of the increase before it took effect. The constitutional challenge to the enabling provision continued. The High Court held that changing the VAT rate constitutes the imposition or alteration of a national tax—a power the Constitution reserves to Parliament—and that section 7(4) amounted to an impermissible delegation of legislative power to the executive. Key concerns included the absence of sufficiently defined statutory limits or criteria guiding the magnitude of any change, the lack of contemporaneous or prompt parliamentary control, and the practical irreversibility of VAT once collected (consumers cannot recover amounts paid during the interim period even if Parliament later refuses to ratify the change).
Core arguments at the Constitutional Court
DA position. Counsel for the DA (including advocate Ngwako Maenetje) argued that the power to tax is among the most intrusive state powers and is deliberately reserved for the elected legislature. Taxation is not a ministerial prerogative; any change to the VAT rate is the exercise of the taxing power itself and must therefore be effected by Parliament through the proper legislative (money-bill) process. The Constitution does not permit Parliament to transfer that core authority to the executive, even temporarily or subject to later ratification. Fiscal convenience cannot override the constitutional allocation of powers or the principle of no taxation without representation.
Government/Minister/Sars position. Advocates for the respondents (including Wim Trengove SC for Sars, Stuart Marcus, and Kameshni Pillay for the Minister) contended that the High Court took an overly rigid view of delegation. They relied on the Constitutional Court’s approach in New Africa Investments, which holds that there is no absolute prohibition on the delegation of legislative powers; validity is assessed contextually by balancing factors such as the nature and extent of the power, the presence of safeguards, and the degree of parliamentary control. They argued that Parliament created the overall VAT framework (who is taxed, the charging provisions, input credits, etc.), and section 7(4) merely authorises a limited, temporary adjustment of one component—the rate—within that existing structure. It is not a plenary power to impose a new tax.
Pillay emphasised the practical necessity of responsive fiscal management: without the mechanism the Minister would lack an effective tool to address immediate revenue shortfalls or sudden fiscal pressures, potentially forcing greater reliance on borrowing. The provision, they submitted, preserves Parliament’s ultimate legislative authority while enabling timely administration. Comparative experience from other constitutional democracies (Canada, England, the United States) was cited to show that limited delegation of rate-adjustment powers is recognised elsewhere, even in systems that uphold separation of powers and no taxation without representation. Procedural points were also raised: the DA’s pleadings focused on absolute prohibitions rather than the multifactor balancing test, and the respondents had not been given a fair opportunity to place full evidence on safeguards and limitations before the High Court.
Broader context, nuances and implications
South Africa’s VAT rate has stood at 15% since the 2018 increase from 14%. VAT is a major revenue source (second only to personal income tax in recent years). The 2025 episode illustrated both the political sensitivity of rate changes—particularly their regressive impact on lower-income households—and the institutional friction within the post-2024 coalition environment. The High Court’s focus on irreversibility highlights a distinctive feature of consumption taxes: once collected at the point of sale, the incidence is diffuse and practically unrecoverable.
If the Constitutional Court confirms the High Court order, Parliament will need to redesign the process for VAT-rate changes within the 24-month suspension period (or any period the apex court may adjust). Possible reforms could include requiring prior or near-contemporaneous parliamentary approval, statutory caps or criteria for rate changes, or tighter timelines. Confirmation would reinforce parliamentary supremacy over taxation and limit executive agility in fiscal crises. Refusal to confirm, or a narrower reading that upholds a more constrained version of the power, would preserve the existing tool for rapid response while still subjecting it to eventual legislative ratification.
The case sits at the intersection of separation of powers, the special constitutional status of money bills, the practical demands of public-finance management in a constrained fiscal environment, and democratic accountability for tax decisions that affect every consumer. Judgment is reserved; the outcome will bind future administrations and shape how South Africa balances executive responsiveness with legislative control over one of its most important revenue instruments.
