Democracy is the winner in VAT hike drama

Democracy is potentially the winner in the value-added tax (VAT) drama which has recently gripped attention.

By setting aside the bungled VAT reversal, the Western Cape High Court in Cape Town has cleared the way for MPs to do their jobs properly when the parliamentary budget process begins afresh.

Let’s hope MPs now have a better understanding of what they are doing. During proceedings, the bench had harsh words for some MPs, singling out ActionSA who “naively thought that its ‘strict condition’ was going to get even the most basic time of day”.

This was a reference to the party imagining it could conditionally support the fiscal framework. That’s not how parliament works. If you want changes, you must propose amendments – to be voted on.

Other comments from the bench also suggest ActionSA did not know what they had done, after the event. When an MP asks for clarity on what he has just voted on, more training is required.

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The episode also highlighted the need for more democracy in the budget process. Finance Minister Enoch Godongwana didn’t have the support of his own party. His budget met resistance even within the Cabinet.

If there is now a shift toward democratically determined budgets, this will align with what former deputy chief justice Dikgang Moseneke said in a 2015 Constitutional Court case involving billionaire Mark Shuttleworth.

“The manner and the extent to which national taxes are raised and appropriated must yield to the democratic will as expressed in law. It is the people, through their duly elected representatives, who decide on the taxes that residents must bear. An executive government may not impose a tax burden or appropriate public money without due and express consent of elected public representatives. That authority, and indeed duty, is solely within the remit of the legislature.”

Sunday’s court ruling puts the duty back within the remit of legislators. After the legal challenges by the DA and EFF, any VAT changes must be properly approved by parliament before taking effect.

The behaviour of small parties during this debacle highlights the need for an electoral threshold. In most countries governed by coalitions, there is a minimum percentage of electoral support which a party must achieve before being allowed into government.

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Even if a party clears the threshold, that is no guarantee of being in government. Much depends on agreements reached with other qualifying parties.

The most common threshold for participation in government appears to be five percent. This applies in Germany, Belgium, New Zealand and Armenia. Sweden and Indonesia use four percent.

Thresholds prevent tiny parties from causing instability by trying to hold the government to ransom. In the VAT drama, smaller parties which made the most noise included ActionSA which achieved 1.2% in the 2024 general election, Rise Mzansi (0.42%) and Build One South Africa (0.41%).

They would not qualify for any government positions, if international standards applied. Another applicable norm is a limit on votes of no confidence.

Generally, the intention is that a coalition government should complete its term, rather than endure frequent upheavals. We really need better rules for coalitions. And better MPs.

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