Minister of Finance Pravin Gordhan recently proposed imposing VAT on foreign businesses who \u201csell e-books, music and other digital goods and services\u201d. This will increase prices to South African consumers, said a tax expert.<\/p>\n
Gerard Soverall, PWC \u2018s head of indirect tax, said that if one considers the revenue generated by large online retailers, governments are losing out on large amounts of VAT.<\/p>\n
Soverall said that the well-known online brands [like iTunes, Amazon, eBay and Steam] are the obvious targets for the new digital download tax.<\/p>\n
\u201cThe large online retailers have a lower threshold for embarrassment when it comes to tax matters, so they will be easier targets than some of the sites which are more difficult to track down,\u201d said Soverall.<\/p>\n
Soverall argued that government\u2019s new digital tax initiative is likely to result in price increases for local consumers.<\/p>\n
\u201cIt is a profit issue at the end of the day. VAT at 14% in South Africa is a material number in your profits so online businesses will pass that on [to consumers]. There is not much doubt in that,\u201d said Soverall.<\/p>\n
However, Soverall argued that even if the 14% SA VAT is passed on to consumers, digital goods are still likely to be more affordable than the physical equivalent purchased in brick and mortar shops.<\/p>\n
He added that this new \u2018tax on online goods\u2019 initiative by government is unlikely to slow the growth in online commerce.<\/p>\n
Soverall said that there is also not a big chance that any online retailers will stop selling products to South Africans because of having to charge VAT.<\/p>\n
\u201cSouth Africa is a major player on the African continent, and it would not make sense for one of the major online players to suddenly stop partaking in the local economy,\u201d said Soverall.<\/p>\n
SA digital games tax proposed by government<\/strong><\/a><\/p>\n Exclusives bails out of games business<\/a><\/strong><\/p>\n SA gamers\u2019 habits reveal industry growth<\/a><\/strong><\/p>\n