It's no secret we have a tax deficit in our country. And government is scrambling and looking to your pocket to try and make it up.
Already finance minister Nhlanhla Nene increased my taxes at the beginning of the year for this deficit. But it's clearly not going to be enough.
And now recently, the government released an interim report proposing increasing Vat in our country to 17%. You will now have to fork out an extra 3%!
So here's why I'm going red in the face...
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When Nene raised our personal income tax, he said he would do it in the different tax brackets. He justified that SARS would tax the rich more than the poor so it would be 'fair'.
So what about raising the Vat rate will allow the poor to get some relief?
Nothing! Truth of the matter is, besides all the hassles of the changes you'll need to make to all your Vat calculations, accounting systems, Purchase Orders to name but a few… I personally don't believe the extra 3% you will pay, will actually go to bridging the tax deficit.
You only need to listen to the news to know how wasteful government has been with our taxes!
So why am I livid about the possible increase in the Vat rate?
I don't trust the government! How do I know that if they raise the Vat rate, and raise the over R20 billion in revenue, they won't waste it all again? And then waste additional money with ad hoc groups of ad hoc execs and ad hoc this and that trying to find out where it went. Or why Zuma's chickens seem to live larger than me?
It's like Aiden Soodkin, Managing Editor of Money Club said 'you're paying taxes to a monarchy, not a democracy. You, me and every other taxpayer in the country are contributing to the South African monarchy.'
I have a feeling it will line someone's fat stomach and fill his pockets. Even SARS who used to be so reputable… well... need I say more? I think I'll save my commentary on that for another time.
But here's what I think the government should do.
You could be missing out on 19 input tax Vat savings...
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So what would make me trust the government?
Firstly, I think they should run the country like you would responsibly run your company. Make budgets, stick to them. Do cost analyses to see if you can acquire assets before you just spend. Spend only what you can. The government needs to do some sound financial planning! I wish they had my Practical Guide to Accountancy
where financial experts tell you how to run a successful business and avoid going under!
Until then, I'm unhappy with the proposal to increase the Vat rate.
But chances are whether I like it or not, it's going to increase. Looking at Africa's Vat rate in general, it looks like ours will go up. The average Vat rate is 16.2% across Africa. And here's a shocker - we're currently paying the lowest Vat in the continent.
If and when the rate changes, I'll be the first to let you know. And I'll show you what it means for your business. In the meantime, here's how you can minimise Vat and save.
So the Vat rate hasn't been changed yet. But did you know the government made 94 changes to the Vat Act this year? Dee Bezuidenhout (ex-SARS Vat auditor) is going to explain all of them at the prestigious Vat Masterclass. Book your seat here.