South Africa Fails to Tax Digital Goods

May 14, 2015 Taxation in South Africa

PRETORIA – Tax laws in South Africa need to be updated in order to properly tax modern digital goods.

In a press conference held on May 12th the head of indirect taxation of PwC Africa Charles de Wet warned that the tax regulations currently in place in South Africa do not adequately keep up with the modern business environment, in relation to the sale of electronic goods.

It was claimed that currently many international businesses supplying goods such as electronic goods such as music, movies, games, apps and ebooks, via the internet to South African consumers do not fall under the scope of national legislation for VAT.

As the provided digital goods are not subject to VAT there is a significant price discrepancy when the same products are provided by suppliers based within South Africa.

The discrepancy not only leads to a reduction in the collection of tax revenues, but also an uneven playing field for businesses.

It was also noted that in many cases large businesses often voluntarily collect taxes on behalf of the government of South Africa, however, smaller regularly providers often skip these obligations.

During the press conference Charles de Wet explained that at the time that the current VAT regulations were created there was no conception of the current levels of technology and market possibility, and steps need to be taken now to ensure that future technological advances are covered by tax laws.

Photo By: Andrew Mason