Finance Minister Enoch Godongwana has defended the government’s decision to raise the Value Added Tax (VAT) rate by 0.5%, arguing that delaying or suspending the increase would have “severe and far-reaching” consequences for South Africa’s economy.
In an affidavit submitted to the Western Cape Division of the High Court, Godongwana responded to legal challenges from the Democratic Alliance (DA) and the Economic Freedom Fighters (EFF), both of which are seeking to block the VAT increase scheduled to take effect on May 1. He maintained that their applications lack merit.
Godongwana warned that stopping the VAT hike would result in a R13.5 billion revenue shortfall, forcing the state to either slash spending or borrow more—both of which, he said, carry significant risks.
“Government would be forced to cut spending or increase borrowing. Spending cuts would likely impact essential services like education, healthcare, housing, and social protection programmes, which would disproportionately harm the poor and vulnerable,” Godongwana stated.
The DA is also contesting the constitutionality of section 7(4) of the VAT Act, which permits the finance minister to temporarily adjust the VAT rate. However, Godongwana argued that the DA’s interpretation is flawed.
“This section does not allow the Finance Minister to amend section 7(1) of the Act. It merely provides temporary, conditional authority to adjust the VAT rate for up to 12 months, subject to Parliament’s legislative powers,” he clarified.
He also dismissed the EFF’s legal bid as vague and unsupported, questioning whether the party aimed to interdict the National Treasury’s report referencing the VAT hike, or the hike itself.
Godongwana emphasized that Parliament would still debate and vote on the proposed VAT increase, expressing confidence that it would pass as a necessary and responsible fiscal measure.
“While tax increases are politically challenging, I believe Parliament will recognize this step as fiscally prudent when the proposed amendment is debated,” he said.
He urged the court to reject the applications for an interim interdict, stating that the applicants have alternative remedies and that the balance of convenience leans heavily against halting the tax increase.
“The DA still has recourse through Part B of its motion and may request appropriate relief if successful. There’s no justification for interim relief at this stage,” he argued.
The court is expected to hear arguments from both parties on Tuesday. The ruling will determine whether the VAT increase proceeds as scheduled or is put on hold pending further judicial review.
Both the DA and EFF are also challenging the adoption of the 2025 Fiscal Framework and Revenue Proposals, claiming that the legislative processes followed by the National Assembly and National Council of Provinces were fundamentally flawed and unlawful.
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