Government scraps VAT hike following legal challenge and settlement talks
In a bid to defuse a high-stakes legal battle, lawyers representing Finance Minister Enoch Godongwana allegedly approached the Democratic Alliance’s (DA) legal team, proposing an out-of-court settlement to resolve the DA’s challenge against the controversial 0.5% Value-Added Tax (VAT) increase set to take effect on May 1, 2025.
The proposal, confirmed by the DA, may have played a key role in the government’s decision to withdraw the VAT hike, which was officially announced earlier today.
The DA, together with the Economic Freedom Fighters (EFF), had launched an urgent application in the Western Cape High Court, seeking to interdict the VAT increase.
The opposition argued that the hike was unconstitutional, procedurally flawed, and would disproportionately impact South Africa’s most vulnerable citizens.
Amid growing legal pressure and divisions within the Government of National Unity (GNU), the government appeared to seek a resolution outside of court to avoid a potentially damaging legal setback.
“The Minister’s legal team initiated talks for a settlement, signaling a willingness to resolve this matter outside of court,” said a DA spokesperson, though the party added that a formal offer was still pending.
The discussions appear to have directly influenced the National Treasury’s sudden reversal, with the VAT increase now officially scrapped marking a shift from Godongwana’s earlier insistence that the hike was essential to address a R13.5 billion revenue shortfall.