South Africa: Court Rules Parliament Must Decide Value Added Tax Changes

The Western Cape High Court ruled that the Finance Minister cannot change the Value Added Tax rate because the Constitution gives that power only to Parliament.

The court gave Parliament 24 months to fix the Value Added Tax law after finding that a section of the act wrongly handed tax powers to the executive.

The Western Cape High Court has ruled that a key part of the Value Added Tax law is unconstitutional because it gives too much power to the Finance Minister.

Judge Matthew Francis delivered the ruling on Thursday.

He said the Constitution makes it clear that only Parliament can decide to introduce, change or remove national taxes. That power cannot be handed to the executive.

The case was brought by the Democratic Alliance in April last year.

The party went to court after Finance Minister Enoch Godongwana announced that Value Added Tax would increase from 1 May.

In its court papers, the Democratic Alliance argued that Section 7(4) of the Value Added Tax Act allowed the minister to impose, increase or reduce a national tax.

The party said this power belongs only to Parliament and cannot legally be delegated to a minister, even for a short period or with safeguards.

Godongwana and South African Revenue Service commissioner Edward Kieswetter opposed the application.

They argued that the section was meant to support sound fiscal management and was not mainly about raising revenue.

Judge Francis rejected that argument.

He said the power to set the rate of a tax is not a small detail.

According to the Constitution, the imposition, reduction or abolition of national taxes must be done by Parliament through the proper lawmaking process.

Francis also said there is nothing in the Constitution that allows this power to be transferred to the executive.

However, the court made it clear that the tax rate already announced will remain in place unless Parliament changes the law.

Parliament has been given 24 months to correct the problem in the legislation.

Democratic Alliance federal council chairperson Helen Zille welcomed the ruling.

She said the judgement confirmed the principle of "no taxation without representation" and strengthened parliamentary oversight of taxes.

The Economic Freedom Fighters also welcomed the decision.

Spokesperson Sinawo Thambo said the ruling supported their long held view that only Parliament can approve changes to the Value Added Tax rate.

Read the original article on Scrolla.