The budget process must be started from scratch and Parliament must approve a new fiscal framework or make amendments to the current one to accommodate the withdrawal of the
VAT increase.
This is according to a letter that Parliament's legal representatives wrote to the Western Cape High Court on Friday.
In the letter informing the court of the decision to withdraw the VAT increase, Parliament states that the fiscal framework adopted on 2 April with the support of numerous smaller parties can no longer stand. This framework provided for a VAT increase of 50 basis points.
READ: Treasury scraps controversial VAT hike – government faces R75bn cuts instead
The
DA and the
EFF's court case, in which they sought to stop the VAT increase, which was supposed to take effect on 1 May, was heard in court last Tuesday with a verdict expected this coming Tuesday.
The initial fiscal framework was approved by the ANC, the IFP, the Patriotic Alliance, ActionSA, the UDM, Rise Mzansi, Bosa, the PAC and Good.
Parliament is now proposing that either a new fiscal framework or an amended fiscal framework be adopted, followed by an 'entirely new [budget] process'.
According to Parliament's letter, the decision to abandon the VAT increase is not a concession that the DA and EFF's argument was correct. These parties argued that the process to adopt the fiscal framework was unlawful.
Meanwhile, the DA filed a supplementary affidavit in court on Friday after Treasury withdrew from settlement negotiations. The DA is asking the court to order that the VAT increase not take effect on 1 May and that the initial fiscal framework be declared unlawful.
According to the DA, Godongwana's gazetted announcement of the scrapping of a VAT hike is not enough to prevent the VAT increase, because the initial fiscal framework remains valid. The DA also argues that there is insufficient time to approve a new fiscal framework before 1 May. Under the VAT Act, the increase automatically takes effect as announced by the minister of finance.
The standing committee on finance, which must amend and approve the fiscal framework, will only sit on Wednesday, after which the National Assembly must accept it.
The DA and Treasury's settlement negotiations were terminated on Friday.
According to Helen Zille, chairperson of the DA's federal council, Treasury's legal representatives approached the DA's legal team with a settlement agreement on Wednesday evening.
The offer was made shortly before the ANC announced it would hold a press conference the next day, and a few hours before Treasury was to announce that it wanted to reverse the VAT increase.
On Thursday morning, the DA announced that Treasury had approached it with a settlement agreement regarding its court case. The DA then said that the court case was crucial in stopping the VAT increase.
READ: DA, EFF unite against ANC's VAT increase, say it's 'a blunder' set to harm the poor
Immediately after the DA's news conference, the ANC and the other smaller parties that had approved the initial fiscal framework in Parliament said that the reversal was thanks to them.
According to these parties, this was thanks to their weeks of negotiations after the initial fiscal framework was accepted with a VAT increase, but with the recommendation that alternative revenue should be sought.
O
n Thursday evening, Zille and ANC chief whip Mdumiseni Ntuli appeared on the SABC programme Face the Nation, during which Ntuli claimed that the DA was lying about settlement negotiations.
According to Ntuli, Godongwana told him this was not true, but Zille retorted that she had evidence.
However, she cannot disclose the evidence because Treasury's settlement offer was made on a without-prejudice basis. This means that this offer cannot be used in future legal actions and cannot be distributed further, except between the two legal teams.
By Friday afternoon, Treasury's legal team had withdrawn from the settlement negotiations.
City Press' sister publication Rapport understands that the negotiations were already at an advanced stage, with a DA source stating that it was clear the ANC had instructed Godongwana to withdraw from the negotiations.
The source said:
This was clearly done so that they could claim credit for the VAT reversal for themselves [the ANC] and the smaller parties.
The DA then submitted its supplementary statement to the court to make it clear that a court ruling was the only way to stop the VAT increase before 1 May.
Treasury and Parliament missed yesterday afternoon's deadline to submit their supplementary statements and so requested an extension.
Treasury did not respond to media enquiries regarding the settlement negotiations with the DA.
