High Court Clips the Finance Minister’s VAT Powers

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Can a finance minister change a tax before Parliament approves it? The courts have now given a clear answer: No. The Western Cape High Court delivered an important ruling that Section 7(4) of the VAT Act is unconstitutional, because it allowed the finance minister to change the VAT rate through the national budget before Parliament formally approved the change.

The provision meant a VAT adjustment could take effect immediately and remain in place for up to 12 months while Parliament decided whether to pass the legislation. The problem? VAT is effectively irreversible, once paid, taxpayers cannot get it back even if Parliament later rejects the change.

The court found this arrangement gave too much legislative power to the executive, undermining the constitutional principle that taxation must be approved by elected representatives in Parliament.

The declaration of invalidity has been suspended for 24 months to allow Parliament time to fix the law. The ruling must still be confirmed by the Constitutional Court.

Why accountants should care

For practitioners advising clients, the ruling reinforces something fundamental: tax certainty depends on proper legislative process. Sudden tax changes announced in a budget speech, before Parliament has approved them, create uncertainty for businesses, investors, and taxpayers.

The debate goes deeper than VAT itself. As previously argued in Accounting Weekly’s article “South Africa Needs a Parliament of Taxpayers, Not a Parliament of Administrators,” taxation should always reflect democratic accountability. When those who impose taxes are insulated from the economic consequences, the system risks drifting toward administrative decision-making rather than representative governance.

The CIBA perspective

CIBA promotes tax systems that are simple, predictable, and approved through transparent democratic processes. Economic growth depends on investor confidence, and that confidence requires tax rules that cannot be changed unilaterally by the executive.

CIBA also maintains that fiscal efficiency must come before tax increases. Governments should first demonstrate responsible use of existing revenue before asking taxpayers to contribute more.

In practical terms, the ruling strengthens a key principle: taxation must remain the responsibility of Parliament, not administrative discretion.

Bottom line

VAT remains 15% for now.

But going forward, any future change will require clear parliamentary approval, reinforcing democratic oversight over one of the most powerful tools of government: taxation.

Source article: Moneyweb