A ruling by the Western Cape High Court has dealt Finance Minister Enoch Godongwana a setback, limiting his ability to adjust the value-added tax (VAT) rate without prior parliamentary approval.

In a judgment handed down late on Thursday (05/03/2026), the court found that Section 7(4) of the Value-Added Tax Act is unconstitutional because it improperly transfers legislative authority to the executive. The provision was declared invalid on the basis that it allows the finance minister to exercise powers that should remain with Parliament.

However, the court suspended its declaration of invalidity for 24 months, giving lawmakers time to amend the legislation and address the constitutional flaw. The matter has also been referred to the Constitutional Court for confirmation.

Previously, Section 7(4) enabled the finance minister to announce changes to the VAT rate during the national budget speech, with the adjustment taking effect immediately, even before Parliament had formally passed legislation approving it.

The ruling follows a legal challenge brought by the Democratic Alliance (DA), which questioned whether the minister should have the authority to impose or alter a national tax without direct parliamentary approval. The dispute arose after last year’s proposal to increase VAT as part of government’s efforts to boost revenue and manage the national budget deficit.

The issue first surfaced during the Government of National Unity’s (GNU) inaugural budget process in 2025, when sharp disagreements emerged over National Treasury’s proposal to raise VAT.

The initial version of the 2025 budget, presented in February, stalled after several parties within the GNU — including the DA and the Economic Freedom Fighters — opposed the planned tax hike and protested in Parliament ahead of Godongwana’s speech.

At that stage, the finance minister intended to lift VAT by two percentage points, from 15% to 17%. The proposal was soon withdrawn. In March, Godongwana returned with a scaled-down plan to raise VAT by one percentage point, phased in over two years. That proposal also failed to gain political support.

By the time the third version of the budget was tabled in May 2025, the government had abandoned the idea of increasing VAT entirely.

Despite the reversal, the legality of the minister’s authority to alter the VAT rate remained under scrutiny, prompting the DA’s court application.

In its legal filings, the DA argued that the dispute centred on constitutional principles relating to the separation of powers and the proper allocation of taxation authority. The party maintained that the ability to impose taxes is fundamental to representative democracy and must be exercised by elected lawmakers rather than the executive.

According to the DA, Section 7(4) effectively granted the finance minister the power to introduce, raise or reduce a national tax — authority that the Constitution assigns exclusively to Parliament and does not permit to be delegated.

The provision stated that once the minister announced a VAT adjustment in the annual budget, the change would take effect from a specified date and remain in force for up to 12 months, provided Parliament passed legislation confirming it within that timeframe.

A key concern raised by the DA was the irreversible nature of VAT. Because the tax is collected throughout the economy, the party argued that even if Parliament later rejected the minister’s decision, taxpayers would not be able to reclaim the VAT paid during the interim period.

While the court agreed that the provision was unconstitutional, it allowed Parliament two years to correct the defect in the law.

Meanwhile, the GNU appeared to navigate the 2026 budget process with fewer disputes. When Godongwana presented the budget last month, he backed away from earlier plans to introduce an additional R20 billion in taxes and left the VAT rate unchanged at 15%.

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