By Lehlohonolo Lehana.
The Western Cape High Court has reserved judgment in the Democratic Alliance (DA) and Economic Freedom Fighters (EFF)’s urgent application to interdict the VAT increase scheduled to come into effect in May.
The DA approached the court to have it set aside the 0.5 percentage point VAT increase announced by Finance Minister Enoch Godongwana in his Budget Speech in March and to also interdict its implementation.
The EFF has also joined the case as an “intervening party”, where it’s also opposing the VAT increase and the finance committee decisions to adopt the fiscal framework.
The DA is askinh the court to declare the VAT increase announcement by the minister unlawful and also wants it to interdict the South African Revenue Service (SARS) from implementing the decision.
In Part B of its application, the DA goes further and wants the court to declare a section of the Value-Added Tax Act unconstitutional.
During the proceedings, the DA’s legal representative Advocate Michael Bishop told the full bench that the case before court was about who decides to increase the VAT rate and whether Parliament acted lawfully.
“It can only be increased after Parliament does it after following a lawful process. It is about making sure democratically elected public representatives of South Africa decide that issue, not the minister.”
Bishop said the announcement by Godongwana to increase the VAT rate was premised on the fact that the minister determines the funding needs.
“That is not a decision for the Minister or the National Treasury. It is a decision for Parliament to make. The decision making role is always with Parliament, how much to raise and how to raise and spend it,” he said.
Bishop told the court that the harm caused by a VAT increase, could not be undone.
“It can’t close its eyes to consequences of imposing a hike fee,” he said, adding that tax increase will affect the poorest and the middle class.
Bishop also told the court that the draft fiscal report of the standing committee on finance did not include a statement on whether it was accepted or rejected.
“There was just never a actual vote of the fiscal framework as it stands. It has never been to a vote,” he said.
Advocate Tembeka Ngcukaitobi for the EFF argued in court on Tuesday that the African National Congress (ANC) used deception to drive the fiscal framework through parliament, because Godongwana had no intention of heeding a recommendation to rethink a VAT increase.
He said the deception lay in persuading MPs to vote in favour of finance committee reports approving the fiscal framework on 1 April, on the false pretext that the text committed the minister to exploring alternative revenue sources.
In his court papers, Godongwana said the interim relief the DA sought was moot because his decision to increase VAT was final and could not be blocked by the court. He reiterated that it was the most prudent way of raising additional revenue for social services and said therefore a parliamentary majority would support it.
“The decision to introduce the VAT rate increase has been made,” the minister said adding that it “cannot be interdicted at this stage”.
The ANC was forced to look to smaller parties for parliamentary support for the fiscal framework after the DA and the EFF refused to support it because of the VAT hike.
Ngcukaitobi recalled that it was approved by the National Assembly (ANC) largely thanks to ActionSA’s decision to vote in favour, on condition that Godongwana be instructed to find a way, within 30 days, to avert the hike taking effect on 1 May.
Justice Katherine Savage asked whether what transpired was not par for the course for a political party trying to shore up support for a particular decision.
Ngcukaitobi quipped that if her inference was that politicians would lie and manipulate to achieve their ends he could accept that in the context of Luthuli House, not the chambers of parliament and not when the public interest was at stake.
Advocate Mahlape Sello, representing Godongwana, said his affidavit dealt with matters the EFF raised on deception, saying the party relied on statements made by ActionSA.
“The minister denies those were his statements,” she said.
Sello also said the claims of unconstitutionality on Godongwana’s power to increase Vat were non-existent.
She also said while VAT will be increased on May 1, it was subject to an eventual decision by Parliament.
“Our constitutional provision allows the Minister to make necessary adjustments, subject to parliamentary oversight.”
Sello asked the court, when deciding on the application to interdict the VAT increase, to assess the impact the relief will have.
Advocate Karrisha Pillay, for Parliament, said the court was tasked to determine the process followed, whether it was lawful and met legislative prescripts.
“Whatever political parties say in the space of politics ought to be areas that the court does not draw inferences from,” she said.
If the court ruled in the finance minister’s favour, the ANC still faced a stiff challenge in getting the Appropriations Bill passed in parliament.
If the court rules in the DA and EFF’s favour, the minister will be given two days to reply and the budget’s contents will have to be considered by the relevant committees.