Finance Minister Enoch Godongwana has defended his decision to increase the Value Added Tax (VAT) rate by 0,5%, saying that suspending the increase would have "severe and far-reaching" consequences for the country.
In a responding affidavit filed in the Western Cape Division of the High Court, Godongwana argued that the DA and EFF's applications to prevent the VAT increase from coming into effect on May 1, are without merit.
In his affidavit, Godongwana further warned that if the VAT increase is halted, the state would lose R13,5 billion in revenue, which would lead to either spending cuts or increased borrowing.
"The consequences would be severe and far-reaching. The government would be immediately forced to either cut spending or increase borrowing. Both options carry risks. Spending cuts would likely fall on essential education, healthcare, housing, and social protection programmes. These disproportionately affect the poor and vulnerable," Godongwana said in court papers.
The DA has challenged the constitutionality of section 7(4) of the VAT Act, which allows Godongwana to adjust the VAT rate. Godongwana argued that the DA's challenge is "misdirected" and based on a "fundamental misinterpretation" of the law.
"The provision does not confer on the Minister of Finance the power to amend section 7(1). Instead, it grants me temporary and conditional authority to adjust the rate for 12 months, subject to Parliament's power to enact legislation," Godongwana explained.
Godongwana also criticised the EFF's application, saying it is "unsupported" and "unclear".
"It is unclear whether the EFF seeks merely to interdict the report (which so happens to make reference to a VAT rate increase) or whether the EFF seeks to interdict 'the introduction of the 0,5 percentage points value-added tax increase'," Godongwana said.
Godongwana stressed that Parliament will have the opportunity to debate and vote on the VAT increase, and he believes that a majority will support it as a "responsible" fiscal step.
"While I accept that tax increases are politically difficult, I believe that, when the proposed amendment to section 7(1) is debated, a majority in Parliament will support it as a responsible and necessary fiscal step," Godongwana said.
The court will hear the DA and EFF's applications on Tuesday.
Godongwana urged the court to dismiss the applications, saying that the balance of convenience overwhelmingly favors refusing the interim interdict.
"The DA is not without remedy. It may pursue the relief sought in Part B of its notice of motion and, if successful, to ask the Court for any just and equitable relief it deems appropriate. There is no need to grant interim relief now," Godongwana said.
The outcome of the court case will determine whether the VAT increase will go ahead as planned or be suspended pending further legal proceedings.
Both the EFF and the DA are challenging the adoption of the 2025 Fiscal Framework and Revenue Proposals, which include the VAT hike.
The parties claim that the decisions taken by the National Assembly and National Council of Provinces (NCOP) were "fundamentally flawed" and unlawful.