Publications
Partners
With so much being said about a slowing economy and the negative economic predictions for 2016, the collection of VAT becomes even more critical for state coffers.
Looking back, the 2015 Tax Statistics bulletin provided an overview of tax revenue collection and tax return information and showed that VAT collections grew by 9.9% for 2014/15 compared to the previous fiscal year.
VAT was the second largest contributor to total tax revenue for 2014/15, totalling R261.3bn (26.5%).
During that period there were 679274 registered VAT vendors, 62% with trading activities.
Personal Income Tax was the largest source of total revenue for 2014/15 with a total amount of R 353.9bn (35.9%) collected.
The tougher economic conditions could have an impact on the number of active VAT vendors that will contribute to the tax base this year.
Due to a potential decrease in turnover below the VAT registration threshold, and a smaller number of growing businesses, it is more than likely that the government would seek to increase VAT collections by a substantial amount in order to subsidise growing government spending and the impact of the devaluation of our currency, among other factors.
The impact of the economic climate on income tax collections would, of course, also need to be considered.
As always, the ongoing annual discussion will take place regarding a potential increase in the VAT rate.
This is envisaged to counteract a possible decrease in VAT vendors and assist significantly with increasing the tax collection base.
Perhaps the time is yet again not ideal from the government’s perspective.
The expected price hikes on various consumer products could result in an increase in the VAT collection without a VAT rate increase and this should also be taken into account to ensure that poorer households do not suffer severely as a result.
On the other hand, it may be an opportune time to take advantage of the positive reception of the “new” finance minister’s appointment. Perhaps this is a time when taxpayers may be a little more forgiving.
As it is, there will be enough speculation about the finance minister’s strategy to save the South African economy from, amongst other things, the recent negative occurrences.
Although taxpayers cannot ultimately control an increase in the VAT rate, at a bare minimum it is imperative that taxpayers ensure that VAT legislation is clear and unambiguous as legislation continuously grows in complexity to keep up with global and economic business trends.
Each year, National Treasury provides an opportunity to taxpayers, tax practitioners and members of the public to submit technical proposals for possible inclusion in Annexure C of the Budget Review.
This is a critical process and important for stakeholders to participate actively to submit proposals to effect legislative changes, and to ensure that VAT is paid accurately within the boundaries of unambiguous legislation.
Although these submissions may only form a small part in addressing inefficiencies in the VAT system, every small change in the larger scheme of significant economic challenges is important and should be actively and continuously sought.
*Anzuette Olivier is associate director for Indirect Tax at KPMG
