By Lehlohonolo Lehana.
Finance Minister Enoch Godongwana has filed his answering affidavit to legal challenges attempting to block the Value Added Tax (VAT) hike due to take effect on 1 May.
The Democratic Alliance (DA) and Economic Freedom Fighters (EFF) are opposed a 0.5 percentage point hike in the VAT to 15.5% and has filed applications to block its implementation.
Godongwana accused both parties of using the courts to settle political scores, warning the Western Cape High Court not to be drawn into what he described as a political dispute masked as a constitutional matter.
Godongwana is the first respondent in the DA’s main application and the second respondent in the EFF’s intervention.
“The decision to introduce the VAT rate increase has been made,” the minister said in his replying affidavit to papers the DA filed on 3 April.
“My decision to introduce the VAT rate increase cannot be interdicted at this stage.”
The case the DA brought before the Western Cape high court is two fold.
In the first part, the party asks the court to set aside the decision by the National Assembly and the National Council of Provinces to adopt the fiscal framework underpinning the budget Godongwana tabled on 12 March.
It seeks an order sending the framework back to parliament’s standing and select committees on finance for reconsideration and suspending the minister’s announcement that VAT will increase by 0.5% from May and by a further 0.5 percent from 1 April next year.
The adoption of the committee reports by the two chambers a fortnight ago paved the way for the legislature to pass the legislation underpinning the budget but the DA argues that the process was flawed because those reports did not provide a clear answer to whether members accepted or amended the fiscal framework.
In part two of its application, the DA asked the court to declare section 7(4) of the Value Added Tax Act unconstitutional. It did so on the basis that the law improperly granted the finance minister the authority to impose tax increases without full parliamentary approval.
Godongwana’s replying affidavit is confined to dealing with the party’s prayer for interim relief in the form of an interdict preventing the tax increase from taking effect.
He said the party had failed to meet the test for interim relief.
The DA had not demonstrated that it had a right to the relief it sought, because its application was based on a misreading of the VAT Act that had prompted it to launch an ill-informed constitutional challenge to the law.
Nor did the DA demonstrate a reasonable fear of irreparable harm or that the balance of convenience weighed in favour of granting the relief.
Given the enormous public interest at stake, the balance of convenience favours the dismissal of the relief.”
Godongwana said section 7(4) of the law conferred on him the power to change the VAT rate for a limited period of time, via a budget announcement, subject to parliament passing legislation within 12 months to give effect to that change.
He said he exercised that power last month, after careful consideration of the policy trade-offs implicit in balancing the budget and preserving the fiscal stability of the country.
So far, DA is not backing down. No headway was made during weekend talks between the ANC and the DA, which is going ahead with its court challenge on April 22.
“We will be in court on Tuesday,” said DA spokeswoman Karabo Khakhau. “The DA has not made a decision whether to leave or remain in the DA. We await a report back from the ANC and the outcome of the case.”
Scrapping the VAT increase would leave a R13.5 billion gap in the budget. Three ANC insiders familiar with the talks said the National Treasury has found no other way to raise the money.
Another sticking point is the parties that were recruited to help pass the fiscal framework lent their support on the condition the VAT hike would be withdrawn.
The ANC insiders said the party is counting on the DA softening its stance and agreeing to vote for the next piece of budget legislation on May 6, when parliament reconvenes after Easter.
DA members familiar with the discussions said the party remains divided between those who want to leave the GNU and those who wish to stay. The outcome of the upcoming court case will be a key consideration when making the final decision in the coming weeks.
Should the ANC fail to win over the DA, it hopes to convince smaller parties like ActionSA and Build One South Africa to sign off on the 2025 Vat hike with a commitment to withdraw it next year.