VAT reversal due to legal pressure – Zille

The DA says the reversal of the 0.5 percentage point VAT increase had little to do with political consultations and everything to do with the DA and EFF's court application in the Western Cape High Court.

Party federal council chairperson Helen Zille said the reversal was an embarrassment to the minister of finance, Enoch Godongwana.

On Thursday morning, National Treasury announced that it would not proceed with the VAT increase as initially planned.

“This decision follows extensive consultations with political parties and careful consideration of the recommendations of the parliamentary committees. By not increasing VAT, estimated revenue will fall short by about R75bn over the medium-term,” the Treasury said in a statement.

During a media briefing on Thursday morning, Zille said: “It has been a long run to this point, but I think today is a cause for celebration. Our excellent legal team made the case as to why the VAT increase should be interdicted and why the minister had made the announcement in terms of an unconstitutional power.”

Zille said she received a call from the minister’s legal team on Wednesday night proposing an out-of-court settlement.

“Now, it came as a surprise to me when late last night I was called by our lawyers to say we have been approached for a settlement offer by the lawyers for the minister of finance. This is a surprise because less than one week before that, in his answering affidavit in our court case, the minister of finance made it clear that the VAT increase of 0.5 percentage point would go ahead on May 1.

“The arguments were so clearly framed that I have no doubt that the minister's legal team went back to him and said it looks as if it is going to be inevitable that the increase could be set aside,” Zille said.

She said Godongwana’s reversal was a clear result of legal pressure.

“It can’t be a greater embarrassment for a finance minister than to have been so adamant that increase was essential, to have repeated that in his court papers a week ago, to have refused to buckle to any pressure or any negotiations or any advice from anybody.

Zille said the DA is now pushing for a full spending review. “We want to cut waste. That's what we want to do. And we want to cut corrupt and fruitless expenditure.”

She also confirmed that the party would not withdraw Part B of its court application.

“Part B of our court case seeks to have section 7.4 of the VAT Act declared unconstitutional because it gives a power to the minister that only parliament should have. Only parliament is empowered to raise taxes under our constitution. That is a power that cannot be delegated to a minister and section 7.4 unconstitutionally delegates that power.”

The DA and ANC are set to meet on Thursday for another round of talks relating to the government of national unity.

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