At least it’s a start   2 comments

There’s a lot of chatter about South Africa’s proposed law requiring foreign businesses to charge VAT on sales of digital products to South African residents. If passed the law will cover things like music, videos, software and games sold on line.

At the moment, like many countries, South Africa’s VAT system struggles to cope with on line sales. New Zealand is the same. There are reverse charge rules but these just don’t work effectively for this sort of thing.

So the proposed answer is to force foreign on line businesses to register for VAT in South Africa if they receive funds from South African bank accounts for on line sales or they sell to South African residents.

A lot of people have rightly pointed to the practical difficulties enforcing a law like this. There’s no question they are pretty challenging. But frankly I can’t see countries like South Africa giving up just because it’s difficult. This is a growing issue and it’s a major inequality in all VAT systems. It needs to be dealt with.

The US has just passed an Act covering the same issue in relation to their State sales taxes. It’s called the Marketplace Fairness Act of 2013.

The EU has also legislated in this area, and yes, it’s obviously a little less challenging when it’s within one economic union.

The debate in Australia is increasing as it is in New Zealand. We now know the NZ IRD are looking at the issue.

Technology and more inter-governmental cooperation on tax matters will make it easier so I think it’s a fair bet we’ll see attempts made to reign this one in sooner rather than later.

Iain

Advertisements

2 responses to “At least it’s a start

Subscribe to comments with RSS.

  1. Reblogged this on GST Bulletin and commented:

    More pressure from retailers for the Government to remove the low value import threshold for goods. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11171599

    This isn’t going to go away. It’s part of the wider debate on how to tax the digital economy. I think faster progress is required. Other countries including the EU, US, South Africa and most of the OECD already tax digital goods and services, software, books, movies, music, hosting services and more received from overseas. New Zealand does not unless the purchaser acquires more than $60,000 worth in a 12 month period.
    New Zealand has moved a step closer with a new GST registration system for non-residents which comes into force in April 2014. If changes are made to the “place of supply” rules for services and enforcement issues are dealt with there’s a lot of revenue potential for the Government. The cost of administering a reduction in the low value import threshold for goods will seem tiny in comparison.

  2. Pingback: At least it’s a start – UPDATE on E-commerce in South Africa | GST Bulletin

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: