Finance minister Enoch Godongwana’s power in deciding on the implementation of a VAT increase took centre stage at the Western Cape High Court on Tuesday.
The DA and EFF are seeking final relief from the Western Cape High Court in the form of an urgent interdict to suspend the decision to increase the VAT rate and to prevent the SA Revenue Service (Sars) from implementing the minister’s decision to increase it.
Addressing a full bench of judge president Nolwazi Mabindla-Boqwana, and judges Katharine Savage and Andre le Grange, DA lawyer Michael Bishop argued parliament unlawfully endorsed the VAT increase.
“The reason we seek interim relief of the VAT increase is because section 7(4) [VAT Act], the source of the decision, is unconstitutional.”
Bishop said the court should grant the interdict because millions of SA consumers would not recoup the money spent on VAT if Godongwana’s decision was declared unlawful in the main application.
EFF legal representative Tembeka Ngcukaitobi argued the court cannot leave the VAT increase dilemma to the political arena because of concerns it could encroach on parliament and the finance minister’s legal powers.
Ngcukaitobi argued that the VAT increase infringed on the bill of rights of South Africans and contended the increase undermined their constitutional right to equality. He said the hike would make the poor poorer.
He said the majority of stakeholders in parliament’s public participation process rejected the hike.
He also argued the process followed by parliament was irregular in that Godongwana created a “deception” in lobbying support for MPs to support the budget, that the increase would be reviewed and changed after a month.
Ngcukaitobi quoted ActionSA parliamentary leader Athol Trollip’s statements about commitment of a review made to parties that supported the budget.
Godongwana's legal representative, Mahlape Sello, however, denied that he deceived MPs. She told the court that a comparison between the budget speech and the allegation demonstrated there was no deception and said Godongwana does not assume responsibility for “any misunderstanding” that Trollip might have.
Sello argued the finance minister’s proposal for a 50 basis point VAT increase would have taken effect on May 1 even if parliament had rejected the proposal.
The judges asked Sello what would have happened on May 1 if parliament rejected Godongwana’s VAT hike. She said the finance minister’s decision would remain effective until parliament passed into law a bill that would set aside his decision. This process would not be finalised before May 1, the DA argued.
“The minister’s announcement is sustained until parliament has voted to amend the act,” she said. This was in line with Sars’ arguments pinned on the VAT Act: “If the minister makes an announcement in the national annual budget contemplated in section 27 (1) of the Public Finance Management, 1999, that the VAT rate specified in this section is to be altered, that alteration will be effective from a date determined by the minister in that announcement, and continues to apply for a period of 12 months from that date subject to parliament passing legislation giving effect to that announcement within that period of 12 months.”
Savage asked: “What if a minister decides to implement a 25% VAT hike?”
Le Grange also asked: “What is happening is that the executive has taken over the power of the legislature. Even if it is for a month, can that be tolerated in the constitution?”
Sello contended the law allows the finance minister’s decision to be sustained until an act amending the increase is passed by parliament.
The DA, in its main application, challenges the constitutionality of the act. Parliament representative Karrisha Pillay detailed to the court the processes of parliament in voting for the budget by the majority. Pillay argued parliament followed all legal processes in the budget.
Mabindla-Boqwana said the court intended to deliver an order by April 29.
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