South Africa’s VAT increase officially stopped by court

The Western Cape High Court suspended the proposed increase in the value-added tax (VAT) rate, formally scrapping the measure.

Finance Minister Enoch Godongwana announced on 23 April 2025 that the 0.5 percentage point increase in the VAT rate, due to take effect on 1 May 2025, wouldn’t be implemented.

In this case brought by the Democratic Alliance (DA), the court’s decision ensures that Parliament must properly approve any changes to the VAT rate before taking effect.

The political party added that it sets aside the unlawful support lent to this VAT hike by a number of parties.

“We are pleased that the Minister of Finance eventually came back to the table and agreed to suspend the VAT increase lawfully,” the DA said.

“This shows that government decisions cannot be made without proper oversight,” it added in a press statement.

The DA said the ruling gives South Africans certainty that changes affecting their pockets will not happen without the necessary checks and balances.

The impending VAT hike has now been formally stopped by a court order agreed between the Minister of Finance and the DA. This also includes a settlement with the Speaker.

“The DA will continue to fight for and with all South Africans to ensure that we create an economy that grows and creates jobs,” it said.

National Treasury statement

Today, the Minister of Finance, Enoch Godongwana, agreed to a court order suspending his decision of 12 March 2025 to increase the VAT rate by 0.5 percentage points.

The Minister of Finance and main respondents in the matter, the Democratic Alliance and the Economic Freedom Fighters (EFF), agreed to have the matter settled out of court, and the Western Cape High Court subsequently ratified the agreement on 27 April 2025.

Minister Godongwana welcomes the court order, as it is entirely consistent with his announcement on 23 April 2025 to suspend the VAT increase. Having already announced the withdrawal, the Minister felt that he would no longer have cause to continue with the court case.

The context of the suspension of the increase is outlined in an affidavit filed earlier on Sunday by the Minister in response to the Democratic Alliance’s supplementary affidavit, filed on 25 April 2025.

Whilst the substance of the Minister’s responding affidavit was to reply to the most contentious points raised by the DA in its submission, a secondary, equally important purpose was to further clarify the rationale behind the proposed increase to VAT, its subsequent withdrawal, and the procedural context that should determine the future processes.

Minister Godongwana maintains that his initial budget proposal of 12 March 2025 was constitutional and appropriate, given the limited options available to balance fiscal sustainability with service delivery needs.

But having listened to the submissions made by political parties and the public and taken into careful consideration the various consultations with various stakeholders, the decision was made to withdraw the proposal, and the court gave effect to that.

For the benefit of the broader public and in the interests of setting the record straight, the Minister wishes to highlight the most salient points covered in the responding affidavit, which are as follows:

• Following the Speaker’s letter of 21 April 2025, it became clear that the VAT increase lacked the necessary political support. The Ministry subsequently announced plans to introduce legislation maintaining VAT at 15% from 1 May 2025.

• While proposed reluctantly, the VAT increase was considered less detrimental to economic growth and employment than alternatives examined by the National Treasury.

• The withdrawal creates a medium-term revenue shortfall of approximately R75 billion, necessitating decreased government expenditure with likely impacts on service delivery.

The Minister welcomes the clarity and certainty provided by the court order. Equally, he remains committed to fiscal responsibility and will pursue alternative measures to ensure sustainable public finances.