Judgment summary
The Democratic Alliance brought an abstract constitutional challenge to section 7(4) of the Value-Added Tax Act 89 of 1991 ('the VAT Act'). That provision empowers the Minister of Finance, by announcement in the national annual budget, to alter the VAT rate specified in section 7(1). The altered rate takes immediate effect from a date determined by the Minister and remains operative for up to 12 months, subject to Parliament passing confirmatory legislation within that period [1].
The court, per Francis J with Cloete J and Lekhuleni J concurring, applied the context-specific, factor-based framework articulated by the Constitutional Court in Nu Africa Duty Free Shops (Pty) Ltd v Minister of Finance and Others 2024 (1) SA 587 (CC). Weighing the nature and scope of the delegated power, the absence of express statutory criteria governing the magnitude of any alteration, the practical irreversibility of VAT, and the exclusively retrospective character of Parliament's control, the court held that section 7(4) constitutes an impermissible delegation of legislative power to the executive [83–88].
The declaration of invalidity was suspended for 24 months from the date of the order to afford Parliament an opportunity to correct the defect. The matter was referred to the Constitutional Court for confirmation or otherwise in terms of section 172(2)(a) of the Constitution [Order paragraphs 2–3]. The applicant's separate claim for a declaratory order concerning the Minister's budget announcement of 12 March 2025 was dismissed as moot [97–99]. The first and second respondents were ordered to pay the applicant's costs jointly and severally on Scale C, including the costs of two counsel where so employed [Order paragraph 5].
Background
Section 7(1) of the VAT Act imposes VAT 'for the benefit of the National Revenue Fund' at a rate of 15 per cent on specified taxable supplies and importations [6]. Section 7(4) provides that if the Minister announces in the national annual budget that the VAT rate is to be altered, the alteration becomes effective from a date determined in the announcement and continues to apply for 12 months, subject to Parliament passing legislation giving effect to the announcement within that period [7].
The provision operates within a broader statutory framework. Section 27(1) of the Public Finance Management Act 1 of 1999 requires the Minister to table the annual budget before the start of each financial year. Section 7 of the Money Bills and Related Matters Act 9 of 2009 requires the budget documentation to include a proposed fiscal framework, and sections 7 and 8 of that Act require Parliament, within 16 days of tabling, to adopt or amend that framework [9].
On 12 March 2025, the Minister announced an increase in the VAT rate from 15% to 15,5% with effect from 1 May 2025, and a further increase to 16% with effect from 1 April 2026 [11]. The announcement attracted significant political opposition. On 21 April 2025, the Speaker of the National Assembly informed the Minister that adoption of the fiscal framework report was subject to conditions, including exploration of alternative revenue proposals [11].
On 24 April 2025, the Minister announced that a Rates and Monetary Amounts and Revenue Laws Bill would be introduced to reverse the VAT increase. On 25 April 2025, he withdrew the Appropriation Bill and the Division of Revenue Bill. On 27 April 2025, this court issued an order by agreement suspending the operation of the 12 March announcement pending the final determination of the application or the passing of legislation regulating the VAT rate, whichever occurred first [12].
On 21 May 2025, the Minister tabled a new budget in Parliament and stated that the proposed VAT rate increases for 2025/26 and 2026/27 had been dropped. The Rates and Monetary Amounts and Revenue Laws Bill, still before Parliament at the time of judgment, contained a clause providing that the 12 March 2025 announcement 'does not come into effect', maintaining the VAT rate at 15%. SARS confirmed that it expected the Bill to be enacted in early 2026 [13].
Core dispute
The central dispute concerned whether section 7(4) of the VAT Act constitutes an unconstitutional delegation of legislative power to the executive. The Democratic Alliance contended, on two primary grounds, that the provision was invalid: first, that the Constitution reserves the power to impose, increase or reduce a national tax exclusively to Parliament and that this power cannot be delegated to the executive; and second, that section 7(4) delegates plenary legislative power to the Minister to amend section 7(1) of the VAT Act, which is impermissible regardless of any safeguards or the limited duration of the power [15].
In argument, the Democratic Alliance also contended that section 7(4) violates section 77 of the Constitution, which prescribes the procedure for enacting money bills, and advanced the alternative argument that even if no absolute prohibition exists, the delegation fails the context-specific, factor-based test articulated in Nu Africa [16].
The Minister and SARS opposed the application. They drew a distinction between delegating the power to impose a new tax and the power to alter the rate of an existing tax, submitting that section 7(4) falls within the latter, permissible category. They further contended that the dominant purpose of section 7(4) is sound fiscal management rather than revenue-raising, making the power regulatory in character. They also submitted that Nu Africa had definitively rejected absolutist approaches to delegation in favour of a context-specific inquiry, and that section 7(4) satisfies that inquiry given the parliamentary oversight mechanisms available [18–19]. The respondents further submitted that the relief sought regarding the March 2025 announcement was moot [25].
Court findings
The court first rejected the respondents' procedural objection. It found that the constitutional principles underlying section 77 were squarely invoked in the founding affidavit, that the respondents had fully addressed the contextual delegation analysis in their papers, and that no prejudice had been suffered [27–34].
On the delegation of the taxing power, the court declined to treat the prohibition as absolute in the manner the Democratic Alliance urged, but equally declined to accept the respondents' distinction between delegating the power to impose a new tax and the power to alter an existing rate. Referring to Ontario English Catholic Teachers' Association 2001 SCC 15, the court observed that the rate is the defining feature of a tax, and that to delegate the power to set the rate is to delegate a substantial part of the taxing power itself [41]. The court also rejected the characterisation of section 7(4)'s dominant purpose as regulatory, noting that the VAT Act's long title, section 7(1), and the Minister's own affidavit described it as a revenue-raising mechanism [42].
The court held that section 77 of the Constitution does not establish an absolute procedural bar to any delegation touching on tax rates, but reinforces the constitutional significance of the power and informs the intensity of scrutiny to be applied [50–51].
Applying the Nu Africa framework to evaluate the plenary power challenge, the court assessed the following factors.
First, the nature and scope of the delegated power: section 7(4) confers an unfettered discretion to alter the central charging provision of the VAT Act, with no statutory cap on the magnitude of the change and no guidance on the circumstances justifying its exercise beyond the requirement of a budget announcement [64–65].
Second, the duration of the power: the 12-month limit was recognised as a significant factor distinguishing the delegation from a permanent cession of authority, but the court noted that for the duration of that period the operative rate is fixed by executive announcement, and tax collected during that period is practically irreversible even if Parliament subsequently withholds confirmation [67–68].
Third, parliamentary oversight: the requirement of confirmatory legislation within 12 months was accepted as a meaningful safeguard, but the court found that amending the fiscal framework does not override the VAT Act, and that the Minister's ability to reverse an announcement is a matter of executive grace, not legal compulsion, and does not constitute a parliamentary check [69–71]. Parliament's primary control operates only ex post, after the tax has already been collected [72].
Fourth, the necessity for speed and flexibility: the court accepted that responsive fiscal management is a legitimate objective and that VAT cannot be adjusted retroactively. It was not persuaded, however, that section 7(4) is the only mechanism capable of achieving fiscal agility, noting that other legislative designs, including requiring parliamentary approval by resolution within a short period, are available, and that the events of this case demonstrated that alternative revenue measures could be found [73–76].
Fifth, the ubiquity of similar provisions: SARS produced a list of 22 provisions in various tax Acts delegating rate-setting authority to the Minister. The court acknowledged this as a relevant consideration but held that the constitutional assessment must remain sensitive to the nature of the tax, the breadth of the discretion, and the adequacy of the safeguards [77–78].
Sixth, the irreversibility of VAT: the transaction-based, practically irreversible character of VAT meant that Parliament's control operates prospectively, not retrospectively, distinguishing section 7(4) from delegations capable of meaningful ex post correction [79–82].
Weighing these factors, the court held that section 7(4) is not accompanied by express statutory criteria governing the magnitude of the alteration, nor does it require legislative ratification within a defined short period. Parliament's control operates only after the tax has been imposed and collected. In the specific context of VAT, this structure falls outside the range of constitutionally permissible delegation as contemplated in Nu Africa [83–88].
The court emphasised that its conclusion does not rest on a categorical prohibition against delegating rate-setting authority or against fiscal responsiveness, but on the absence in section 7(4) of sufficiently defined statutory limits or mechanisms of prompt legislative control to maintain the balance between executive agility and parliamentary supremacy [88].
On the March 2025 announcement, the court found that the relief sought was moot. The announcement had been suspended by court order, the Minister had publicly withdrawn it on 21 May 2025, and legislation before Parliament provided that it 'does not come into effect'. No useful purpose would be served by granting the additional declaratory relief [97–99].
On costs, the court found that the Democratic Alliance had been substantially successful, that the litigation was not frivolous or vexatious, and that it had raised complex and novel constitutional questions without direct precedent. The first and second respondents were ordered to pay the applicant's costs [100–101].
Outcome
The court declared section 7(4) of the Value-Added Tax Act 89 of 1991 inconsistent with the Constitution and invalid [Order paragraph 1]. The declaration of invalidity was suspended for 24 months from the date of the order to afford Parliament an opportunity to correct the defect, during which period section 7(4) remains operative [Order paragraph 2; paragraph 96]. The declaration was referred to the Constitutional Court for confirmation or otherwise in terms of section 172(2)(a) of the Constitution [Order paragraph 3]. The application for a declaratory order in respect of the Minister's announcement of 12 March 2025 was dismissed [Order paragraph 4]. The first and second respondents were ordered to pay the applicant's costs jointly and severally on Scale C, including the costs of two counsel where so employed [Order paragraph 5]. The Registrar was directed to transmit the record to the Registrar of the Constitutional Court within 10 court days [Order paragraph 6].
Major issues / areas of contention
- Whether section 7(4) of the VAT Act 89 of 1991 constitutes an unconstitutional delegation of the power to impose, increase or reduce a national tax, a power the Constitution reserves to Parliament.
- Whether the prohibition on delegating the taxing power is absolute or qualified, and whether it extends to delegating authority to alter the rate of an existing tax as opposed to imposing a wholly new tax.
- Whether section 7(4) constitutes a delegation of plenary legislative power, and whether such a delegation is permissible under the context-specific, factor-based framework articulated in Nu Africa Duty Free Shops (Pty) Ltd v Minister of Finance and Others 2024 (1) SA 587 (CC).
- Whether section 77 of the Constitution, which prescribes the procedure for enacting money bills, establishes an absolute procedural bar to any delegation touching on tax rates, or whether it merely informs the intensity of constitutional scrutiny.
- Whether the parliamentary oversight mechanisms accompanying section 7(4), including the requirement of confirmatory legislation within 12 months and the power to amend the fiscal framework, constitute adequate safeguards given the practical irreversibility of VAT once collected.
- Whether the absence of express statutory criteria governing the magnitude of a rate alteration and the absence of any requirement for prompt legislative ratification render section 7(4) constitutionally impermissible.
- Whether the Democratic Alliance's reliance in argument on section 77 of the Constitution and the Nu Africa contextual factors introduced a new cause of action beyond what was pleaded in the founding affidavit.
- Whether the relief sought in respect of the Minister's budget announcement of 12 March 2025 was moot, given the subsequent suspension, withdrawal and proposed legislative reversal of that announcement.
- What the appropriate remedy should be: whether a declaration of invalidity should operate immediately or be suspended, and for how long, to allow Parliament to enact constitutionally compliant legislation.