The Western Cape High Court on Sunday 27 April ruled in favour of the Democratic Alliance (DA) and Economic Freedom Fighters (EFF), effectively halting the government’s proposed increase in Value-Added Tax (VAT) of 0,5%.
The National Treasury’s plan to raise VAT from 15% to 16% over two years was aimed at addressing a R75 billion budget shortfall.
The proposal, however, faced strong opposition from various political parties and civil society groups, who argued that the increase would disproportionately affect the poor, especially given South Africa’s high unemployment rate of over 32% and the reliance of more than 20 million citizens on welfare grants.
The DA and EFF challenged the VAT increase in court, asserting that it was unconstitutional and lacked adequate public engagement and transparency, rendering it procedurally flawed. The court ordered that Godongwana pay half of the DA’s legal costs and that the Speaker of the National Assembly and Chairperson of the National Council of Provinces pay the other half.
The same cost arrangement was imposed in favour of the EFF, News24 reported.
On Sunday evening, Helen Zille, DA Federal Council Chairperson, hailed the court order halting VAT as a “victory for all South Africans”. She said in a statement: “The court’s decision ensures 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.”
Only two days after the Western Cape High Court heard the application Finance Minister Enoch Godongwana on Thursday 24 April announced the withdrawal of the controversial increase, a move experts described as an acknowledgment by the National Treasury of its weak case.
