SARS challenges VAT ruling
Denying the National Treasury limited powers to ‘swiftly’ adjust the VAT rate to respond to pressing fiscal pressures, as it attempted to do last year, will see the government taking up more debt to plug holes in the budget.
This is the position adopted by SARS in court papers before the Constitutional Court in a high-stakes legal battle that could determine whether the executive can adjust the VAT rate.
At the heart of SARS’s argument is that the executive has limited powers to make short-term adjustments to VAT to adapt to changing circumstances more rapidly than Parliament can.
According to TimesLIVE, SARS says while it accepts only the legislature may impose taxes, once this is done it may delegate to the Minister a limited power to make temporary adjustments to the tax rate.
It says such a delegation by Parliament gives effect to its constitutional power of taxation and does not fall foul of it.
A proposed 0.5% VAT increase scheduled for May 2025 was suspended and later abandoned following legal and political pressure.
SARS and the Treasury are asking the Constitutional Court to set aside the ruling by the Western Cape High Court that ruled that section 7(4) of the VAT Act is unconstitutional and invalid.
The essence of the High Court’s decision is that granting the Minister stand-alone power to alter the VAT rate (effective immediately, subject to a 12-month delayed parliamentary review) constitutes an unlawful delegation of legislative authority.
The apex court will hear the matter in the last week of this month.
Article disclaimer: While we have made every effort to ensure the accuracy of this article, it is not intended to provide final legal advice as facts and situations will differ from case to case, and therefore specific legal advice should be sought with a lawyer.
