Africa-Press – South-Africa. Legal experts say the reversal of the planned VAT hike in South Africa faces a massive hurdle, given that the fiscal framework has been approved and adopted by parliament.
Finance minister Enoch Godongwana on Thursday (24 April) announced that National Treasury would be walking back the 0.5 percentage point VAT hike that was set to kick in on 1 May.
To do this, the minister said that the Rates and Monetary Amounts and Amendment of Revenue Laws Bill (Rates Bill) tabled with the budget would be withdrawn and reintroduced without the VAT change in it.
The Appropriations Bill and Division of Revenue Bill will also be withdrawn and changed to reflect these changes, he said.
The Rates Bill is tabled alongside the budget and sets the various taxes and revenue measures to fund the budget. It is a fundamental piece of legislation that underpins the fiscal framework.
While National Treasury and the South African Revenue Service (SARS) have already published the updated bill taking out the VAT hike, the fact remains that parliament has already approved and adopted the fiscal framework containing the tax hike.
According to legal expert and law lecturer Benjamin Cronin, this remains the biggest hurdle to getting rid of the VAT hike because the finance minister’s announcement and new Rates Bill doesn’t undo this.
Under Section 7(4) of the VAT Act, the finance minister is empowered to change VAT by tabling an announcement to that effect alongside the budget.
There is no mechanism to reverse or change this after the fact.
Even tabling a new draft Rates Bill—as has now been done—doesn’t change what has legally and lawfully been adopted and passed by Parliament.
Echoing other legal experts, Cronin said that the introduction of a new draft Rates Bill can’t be plausibly passed by Parliament in time to interrupt the 1 May application of the minister’s original announcement.
Thomson Wilks Attorneys’ director, Bartho van Tonder, said that the announcement of the withdrawal of VAT and the introduction of a new Rates Bill does not mean the VAT hike is gone.
Legally speaking, the only effective and certain way that the VAT hike can be halted before the 1 May deadline is for a court to make this order.
VAT confusion
Consumer Goods Council CEO, Zinhle Tyikwe
The minister’s announcement that VAT will be withdrawn has created a great deal of uncertainty.
In the weeks up to and even on the day of the announcement, businesses and service providers were communicating changes to billing, taking the new VAT rate of 15.5% into account.
Following the announcement, some of these businesses have issued communications walking this back, saying that VAT will continue to be billed at 15%.
However, Cronnin said that the minister’s announcement does not constitute a legal change.
“The Finance Minister can’t just change the VAT rate back to 15% by mere announcement,” he said.
This is also something that is not lost on some organisations, with the Consumer Goods Council of South Africa (CGCSA) not celebrating just yet.
“While we understand that the minister has withdrawn the VAT increase by issuing a public statement, clarity is still sought on when the appropriate legislation will be passed to enable the reversal of the VAT increase,” said CGCSA CEO Zinhle Tyikwe.
The group said that businesses have had to incur exorbitant costs and taken great lengths to prepare for the VAT hike, all of which were absorbed and not passed onto consumers.
More costs would have to be incurred to reverse this—and again and again if the government keeps making changes on the fly.
“It is important to highlight that the government’s decisions have a significant impact from a practicality and implementation perspective,” the council said.
“Going forward, it is critical that the Government works speedily, in unity and in consultation with affected parties to eliminate unnecessary financial burdens, confusion, and to promote regulatory certainty.”
There is one positive in the mess, however: SARS has withdrawn all its guides and documentation referring to the 15.5% VAT rate.
This means that, even if the 15.5% rate is still ‘legally’ on the cards, it appears that the Revenue Service has kicked it to the archives, even if the processing of the new bills will lag behind.
“The FAQ and the Pocket Guide on the VAT Rate Increase from 1 May 2025 (have been) withdrawn by the Rates and Monetary Amounts and Amendment of Revenue Laws Bill as tabled by the Minister of Finance in the National Assembly on 24 April 2025,” it said.
Budget reset
Adding further chaos into the mix, economists say the tabling of a new Rates Bill and the withdrawal of the other budget bills has the practical effect of withdrawing the entire budget.
This leaves the approval of the fiscal framework in question, especially given that it was supported by a narrow majority in Parliament.
Eight of the ten parties in the Government of National Unity (GNU)—minus the Democratic Alliance and the Freedom Front Plus—were joined by Action SA and BOSA to pass the framework, including the VAT hike.
They claimed this was done so as not to reset the entire budget process and just remove the VAT hike after the fact.
However, it seems the effective result of this has been a reset of the entire budget process anyway, as changes will have to be made to the budget.
The Bureau for Economic Research said that a new budget will have to be tabled as National Treasury has stated it will have to make expenditure cuts to balance the books.
The fiscal framework approved by parliament sets the revenue and expenditure framework, which cannot be changed after the fact, meaning a new framework will likely have to be developed, the BER said.
Source: businesstech
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