AUTHOR: GRAEME PALMER
In a significant judgment delivered on 5 March 2026, the Western Cape Division of the High Court declared section 7(4) of the Value‑Added Tax Act 89 of 1991 unconstitutional. The provision had allowed the Minister of Finance to alter the VAT rate through a budget announcement, with immediate effect, for up to 12 months while awaiting parliamentary confirmation. The court held that this mechanism amounted to an impermissible delegation of Parliament’s exclusive taxing authority.
The case was brought by the Democratic Alliance (DA), which launched a constitutional challenge following the Minister’s controversial March 2025 announcement of phased VAT increases. Although the Minister later withdrew the increases due to political pressure, the underlying constitutional question remained: could the executive unilaterally alter a national tax rate, even temporarily, without prior parliamentary approval?
The court’s central concern was the constitutional architecture of fiscal authority. The judgment reaffirmed long‑standing principles that taxation is a function of representative democracy, and Parliament being the body directly accountable to the public holds the exclusive power to impose, raise, or reduce national taxes. While the DA argued that any delegation of taxing power is automatically unconstitutional, the respondents maintained that adjusting the rate of an existing tax is distinguishable from imposing a new tax.
The court rejected both extremes. Relying on the Constitutional Court’s contextual approach in Nu Africa Duty Free Shops (Pty) Ltd v Minister of Finance and Others, it held that delegations of legislative power are not automatically invalid, but must be assessed case‑by‑case, taking into account the nature and extent of the power and the safeguards accompanying it.
Ultimately, it was the immediate and irreversible effect of VAT that tipped the constitutional balance. Once a VAT rate takes effect, suppliers collect it from consumers in real time, and the amounts cannot be refunded even if Parliament later refuses to confirm the Minister’s change. This meant that, for up to a year, the executive alone determined the tax burden borne by the public thus undermining parliamentary supremacy.
The court stressed that although Parliament retained the power to confirm or reject the change, its oversight was entirely ex post facto. The Constitution, by contrast, requires that decisions to impose or alter national taxes be made through the legislative process, not by executive decree followed by delayed legislative oversight.
The court found several weaknesses in the design of section 7(4):
- No statutory criteria guiding when and how the Minister could change the rate;
- No limits on the magnitude of the increase or reduction;
- No requirement for rapid parliamentary ratification;
- A full year during which the executive’s rate would apply regardless of Parliament’s eventual decision.
This design, the court held, fell outside the range of constitutionally permissible delegations.
Recognising the potential disruption to the wider fiscal system given similar mechanisms across various tax statutes the court suspended the declaration of invalidity for 24 months. This gives Parliament time to redesign the mechanism, potentially by imposing caps, introducing mandatory rapid approval, or adopting an alternative oversight framework.
More broadly, the judgment reasserts Parliament’s central role in South Africa’s fiscal democracy and signals that while flexibility in economic management is vital, it cannot come at the expense of constitutional principles. In essence, the power to tax belongs to the people’s elected representatives in Parliament not the executive.
Tel:+27 31 570 5496email: grame.palmer@gb.co.za