VAT Act rate-setting power declared unconstitutional — Parliament gets 24 months

The Democratic Alliance challenged the constitutionality of section 7(4) of the Value-Added Tax Act 89 of 1991, which authorises the Minister of Finance to alter the VAT rate by budget announcement with immediate effect. The challenge arose after the Minister's March 2025 VAT increase announcement. SARS identified 22 other tax provisions containing similar delegated rate-setting powers.

The court held: The Court declared section 7(4) unconstitutional and invalid. Applying the Nu Africa contextual framework for assessing delegated legislative power, the Court held that the provision authorises the executive to determine, with immediate effect, the quantum of a broadly based national tax affecting the entire economy, without sufficiently defined statutory limits or mechanisms of prompt parliamentary control. The declaration of invalidity was suspended for 24 months to allow Parliament to correct the defect. The order was referred to the Constitutional Court for confirmation under s 172(2)(a). The separate challenge to the Minister's March 2025 VAT increase announcement was dismissed as moot.

Legal impact: This is the first application of the Nu Africa contextual delegation framework to a broadly based national tax rate-setting power. The judgment does not impose a categorical prohibition on delegated rate-setting but requires statutory criteria governing the magnitude of alterations and a mechanism for prompt parliamentary ratification. SARS itself identified 22 similar delegation provisions in other tax Acts that may be vulnerable to the same reasoning. Until the Constitutional Court confirms the order and Parliament enacts remedial legislation, the current mechanism remains operative but its constitutional foundation is in question.