Godongwana's Vat rewind may hit legal wall
Midnight media move won't stop hike without new legislation or court order.
National Treasury and Finance Minister Enoch Godongwana's early morning announcement, made through a media statement, that he was reversing his decision to increase the value-added tax (Vat) appears to have no legal standing.
The only way to overturn the increase is for Parliament to adopt a new Rates and Monetary Amounts and the Amendment of the Revenue Laws Bill. It is highly improbable that this will happen before 1 May, especially considering the SA public holidays next week.
PwC tax partner Kyle Mandy says that Section 7(4) of the Vat Act operates as the law stands now because the minister announced in the 12 March Budget speech that the rate would increase on 1 May. The legal status of the minister's media statement released after midnight is 'probably zero'.
ALSO READ: A R1 billion U-turn: Scrapping the VAT increase leaves no winners, just absolute chaos
Legality vs reality
'The reality is that there are the legal and pragmatic sides to this matter. In the absence of the new bill being promulgated before 1 May, which is nigh on impossible, or an interdict being granted by the high court, it is hard to see that any Vat vendor is going to increase the rate based on pure legality. They would risk having a riot outside their doors.'
This is not an ideal situation, and the whole saga has a 'Trumpish feel' to it, Mandy adds.
Cedric Frolick, the house chair, said on behalf of the speaker of the National Assembly that the speaker and members of parliament in general 'have become aware' that the Minister of Finance intends to introduce a new bill proposing to retain the current Vat rate instead of the increase announced in March 2025.
'As a consequence, the minister will also withdraw the current Division of Revenue Bill and Appropriation Bill in order to propose expenditure adjustments. It is expected that the minister will then introduce new bills in the forthcoming weeks.'
Frolick adds that these developments will have obvious consequences for Parliament and the National Assembly's programme. The effect of this will be the review of the parliamentary programme as it currently stands.
Parliament is in recess until 1 May, and there are still several public holidays ahead.
ALSO READ: Where will the minister find the money to make up for scrapping the VAT increase?
Unchartered territory
Aneria Bouwer, senior tax consultant at Bowmans, says Vat vendors are currently dealing with a draft bill that still states the Vat rate is 15.5%, and now there is a media statement stating that there will be a new bill proposing that the rate remains at 15%.
'You are stuck with two proposals in the form of a draft bill that has already been published, and the indication of another draft rates bill. From a legal perspective, the reversal of the increase is not something that is provided for in legislation. It really is uncharted territory.'
Gerhard Badenhorst, Vat expert and partner at Cliff Dekker Hofmeyr, says vendors are at their wits' end because of the legal uncertainty they face.
He has approached National Treasury and the South African Revenue Service for a directive clarifying the correct route. 'The reversal must follow a legal process, and I am not sure which process the minister has in mind before 1 May.'
ALSO READ: Economists welcome scrapping of VAT increase
Bartho van Tonder, director at Thomson Wilks Attorneys, says the minister has the power to change the rate and he did this on 12 March 2025.
Section 7(4) does not specifically provide the power to make a further change or withdraw the change within another 12 months. The announced rate change would either be endorsed or changed through Parliament, through the adoption of the relevant bill.
'As noted from the minister's announcement, the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill will take at least several weeks to finalise. With the Vat rate scheduled to increase to 15.5% next Thursday, there is insufficient time to introduce the bill to prevent the increase in the ordinary course.'
The DA and EFF have taken the minister and parliament to court, challenging the process followed to increase the rate, as well as the constitutionality of Section 7(4).
Given the latest developments, it is uncertain whether the parties will settle the matter out of court or what the status of the case will be.
ALSO READ: VAT U-turn: How businesses felt the brunt of political roulette
It seems that the only effective and certain way that the Vat hike can be halted before the 1 May deadline is for the court to make this order on Tuesday 29 April 2025.
Van Tonder says it appears that this may be the agreement reached between the minister and the DA. The DA confirmed late last night that lawyers acting for the Minister of Finance had approached the lawyers appointed by the DA to propose an out-of-court settlement.
Mandy notes that 'as a general proposition' the courts don't make rulings on moot matters, although that doesn't apply here as 'legally' the media statement does not have legal standing.
This article was republished from Moneyweb. Read the original here.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Daily Maverick
2 hours ago
- Daily Maverick
Enterprising pupils from Cape Town school turn R1m in virtual capital into real-world win
Armed with R1m in virtual capital, learners worked in teams to build investment portfolios and respond to a series of fictional market scenarios. Each scenario challenged them to apply critical thinking and adapt to local and global economic developments as depicted. What began as a fun challenge at investor events has evolved into a financial literacy exercise introducing school learners to the world of investing in the form of the Coronation Top Investor Challenge: Schools Edition. Reuben Rietoff and Mbali Nhuku, from Parklands College in Cape Town, competing as the Cashflow Co-Pilots, outperformed hundreds of teams to win R25,000 each in Coronation unit trust vouchers, while their school has been awarded a R50,000 cash prize. A total of 292 teams representing 79 schools registered for the competition, with a minimum of two and a maximum of five learners per team. Of those, 191 teams from 58 schools completed the competition (submitted results for all three rounds). Armed with R1-million in virtual capital, learners worked in teams to build investment portfolios and respond to a series of fictional market scenarios. Each scenario challenged them to apply critical thinking and adapt to local and global economic developments as depicted. 'This was the first time many of these learners encountered the world of investing — and they rose to the challenge with remarkable insight and enthusiasm,' said Kirshni Totaram, a senior executive at Coronation. The competitors receive a beginner-friendly guide to investment fundamentals, to help them develop a working understanding of financial markets and portfolio construction. 'This challenge was a brilliant way for learners to apply their classroom theory in a real-world setting. Opportunities like this show them that what they're learning isn't just for exams. It's equipping them to make good decisions in life,' said Totaram. 'When I was told that Parklands College had won, I was surprised but not surprised. The competition is tough, but I know the calibre of our learners,' said Craig Fortuin, subject leader in Economics at Parklands College. The two enterprising scholars on the college's investing team said the competition felt like a great new opportunity to try something different. 'I think what surprised us most was how well gold performed — it ended up being one of our best investments. If I won money like this in real life, I think I'd actually invest it and see how I can grow it over time. It's made me want to keep learning and improve my skills,' said Nhuku. Rietoff said he has always been interested in commerce, and knowing that Nhuku was also keen on commerce, the pair decided, 'This was a great chance to see how our minds could work together. It was tricky at first, especially deciding which sectors to invest in. But, over time, we learned from each other, and that really helped us in the end.' 'We know that talent is everywhere, but opportunity is not,' said Totaram. 'That's why our programmes start as early as high school and extend all the way to the professional level — helping to build a pipeline of skilled, confident young people ready to thrive in the financial sector.' The initiative is not Coronation's first foray into supporting young people. The Coronation Exceptional Student Bursary Programme, launched in 1993, supports academically strong learners from under-resourced communities through their tertiary studies. Many go on to intern at the firm, gaining real-world exposure to the workplace. Post-graduation, Coronation offers the Catapult Programme, a 23-month structured experience developed in partnership with stockbroking firms. The asset manager also backs the Asisa Academy's Fezeka Investment Management Programme, which supports high-potential black female graduates when they enter the industry. DM
Eyewitness News
14 hours ago
- Eyewitness News
Changes to MK Party's parliamentary caucus excludes former SG Floyd Shivambu
CAPE TOWN - The uMkhonto weSizwe (MK) Party has announced changes to its parliamentary caucus, which doesn't include its former secretary general, Floyd Shivambu. The party announced recently that Shivambu would be heading to Parliament following his removal as secretary general for visiting a wanted fugitive, Pastor Shepherd Bushiri, in Malawi earlier in 2025. ALSO READ: - 'I will never resign from the MK Party,' says Shivambu - Floyd Shivambu: 'I don't beg for membership of political organisations' - Shivambu: The president of the MK Party is surrounded by political scoundrels The MK Party has now added nine new members to its caucus after the window for parties to make changes to their lists started in June. It announced on Saturday that nine new members would be sworn in as members of Parliament (MPs) on Wednesday. The party said the new members will fill nine vacant seats in accordance with Section 47 of the Constitution. The MK Party's new caucus members include Khanyisile Litchfield, who was a member of the African National Congress (ANC) before joining the Economic Freed Fighters (EFF) when the red berets first arrived in Parliament in 2014, before losing her seat in 2015. Litchfield later joined the United Democratic Movement (UDM), serving as its deputy president, before leaving the organisation. Another new addition to the MK Party list is Noma Buthelezi, who served as the spokesperson of the MK Party Youth League in KwaZulu-Natal. The list also includes Lungisani Graduate Shangase, Jeffrey Bhekumndeni Mtolo, Zibuse Cele, Siphetho Mkhize, Philisande Mkhize, Gift Motaung, and Ntandoyenkosi Shezi. With Shivambu no longer heading to Parliament, the party also distanced itself from Shivambu's briefing on Thursday, where he discussed matters facing the country and also criticised his MK Party colleagues. While Shivambu hinted at starting a new party, he said he remains a member of the MK Party.
eNCA
21 hours ago
- eNCA
Call to criminalise sex buyers
JOHANNESBURG - Embrace Dignity is calling on government to declare prostitution a crime against youth. It also wants Parliament to endorse the Equality Model or Sankara Law. It criminalises the buying of sex and pimps and brothel keepers and not just sex workers. Norway, Iceland, Canada, Northern Ireland, France and Ireland have already adopted the law.
