South Africa Court Rules Minister Cannot Change VAT Rate

March 10, 2026

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With the 2025 Budget, the Ministry of Finance sought to increase the VAT rate from 15% to 15.5% in 2025 and to 16% in 2026. However, the Democratic Alliance (DA) challenged this, claiming that the Minister of Finance lacked the authority to change the VAT rate through a budget announcement. The dispute between the Minister of Finance, Enoch Godongwana, and the DA was settled by the Western Cape High Court.

Court's Decision and the Impact on Future VAT Changes

Last March, Minister Enoch Godongwana announced in the 2025 Budget that the VAT rate would increase to 15.5% with an effective date of May 2025, as well as an additional increase to 16% on April 1, 2026. However, faced with public disagreement and pushback from other political parties, the Minister abolished the planned increase in the standard VAT rate last April.

Nonetheless, in April 2025, the Western Cape High Court heard an urgent application brought by the Democratic DA and the Economic Freedom Fighters (EFF). The two political parties sought to set aside the resolutions adopted by the National Assembly and the National Council of Provinces approving the reports of their respective finance committees on the 2025 Budget.

After the court hearing, Minister Godongwana announced that he would introduce the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill 2025, often called the Rates Bill. Moreover, he stated that under the Rates Bill, the VAT rate will remain at 15%. Additionally, the Minister formally notified Parliament that the Bill would include provisions to reverse the VAT rate increase announced under section 7(4) of the VAT Act.

This raised another question: whether the Finance Minister should have the authority to set or change the VAT rate. The DA argued that such authority belongs only to Parliament, since it is the elected body representing the people and therefore responsible for making decisions about taxes.

The Western Cape High Court agreed with this argument, stating that allowing the Minister to adjust the VAT rate unilaterally is an impermissible delegation of legislative power. Furthermore, the ruling underscores the constitutional principle that taxation decisions must remain subject to parliamentary control to ensure democratic oversight and representation, and declared section 7(4) of South Africa’s VAT Act unconstitutional.

The Court added that the provision lacked clear limits, such as caps on how much the rate could increase or decrease, or guidance on when the power should be used, effectively giving the minister unfettered discretion over a tax that affects all consumers.

Conclusion

While the Court declared the provision invalid, it suspended the ruling for 24 months to give Parliament time to amend the law and correct the constitutional issue, which ultimately must be confirmed by the Constitutional Court before it takes full legal effect. Importantly, the decision confirms the principle of no taxation without representation, meaning that any changes to VAT affecting South Africans must be debated and approved through the proper legislative process.

Source: Bloomberg, South Africa Democratic Alliance, VATabout

Why did the Democratic Alliance challenge the VAT rate increase in South Africa?

The Democratic Alliance challenged the VAT rate increase because it argued that the Minister of Finance did not have the legal authority to change the VAT rate through a budget announcement. According to the party, only Parliament has the constitutional authority to approve or modify taxes, including VAT.

What VAT rate increases were proposed in South Africa’s 2025 Budget?

In the 2025 Budget, Finance Minister Enoch Godongwana proposed increasing the VAT rate from 15% to 15.5% starting in May 2025, followed by a further increase to 16% on April 1, 2026. However, these increases were later withdrawn after public and political opposition.

What did the Western Cape High Court rule regarding the VAT Act?

The Western Cape High Court ruled that section 7(4) of South Africa’s VAT Act is unconstitutional because it allows the finance minister to change the VAT rate without parliamentary approval. The court found that this represented an improper delegation of legislative authority.

Why did the court consider the minister’s VAT powers unconstitutional?

The court determined that the provision gave the finance minister excessive discretion to change the VAT rate without clear limits or guidelines. This meant the minister could alter a major national tax without sufficient parliamentary oversight, which contradicts constitutional principles.

What does the ruling mean for future VAT changes in South Africa?

The ruling reinforces that any future changes to the VAT rate must go through Parliament. This ensures that tax decisions are debated and approved by elected representatives rather than being implemented unilaterally by the finance minister.

Why was the court’s ruling suspended for 24 months?

The court suspended the ruling for 24 months to allow Parliament time to amend the law and correct the constitutional issues identified in the VAT Act. The decision must also be confirmed by the Constitutional Court before it becomes fully effective.

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