VAT in the world is going on?

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VAT in the world is going on?

When the tax was increased on April 1, it seems to have caught many vendors and consumers off guard

Consumer journalist

This month’s VAT increase from 14% to 15% being the first in 25 years, it has caused a lot upset between vendors and their customers, many of whom were encountering the issue for the first time in their adult lives.
When I asked one major supermarket group’s PR person why they hadn’t been able to adjust all the shelf prices by April 1, to avoid having to charge their customers extra at the till, I got an exasperated response.
“The government decreed that the VAT rate be changed for the first time in 25 years, on the Easter weekend, when the Sassa system was being changed. It’s been a complete nightmare – the shops closed late on the night of March 31 and reopened at 8am, and by then every single shelf price had to be changed? Absurd.”
The retailers have now had enough time to get the “the price you see is the price you pay” thing right, but there have been other VAT-related payment disputes.Advance bookings for holidays is a particularly tricky issue.
Last week Craig Rodney tweeted: “Does anyone understand the legalities around price increases relating to the VAT increase?
“I booked and paid in full for a local holiday months ago; today they sent me an invoice for the extra 1%, saying they are charging it on all current bookings.”
I replied, saying the establishment can’t do that, but apparently that’s not necessarily correct – as I found out when I investigated another complaint.
Last year Ilse Adler of Pettenberg Bay booked a 10-day stay at the Addo Elephant Park for next month and was asked to pay a 50% deposit in July and the balance in March.
“Both amounts were paid before the due date,” she said, “and to make sure all was in order, I phoned a week after I made my last payment in March, to find out if all the monies had been received.“All was paid for, I was told. But to my great surprise SANParks has emailed us to say we owe another R90, due to the VAT increase which became effective from April 1. Now how is this possible?
“It was explained to me that the money was kept at SANParks and would only be invoiced and VAT paid over about a month before our actual stay at Addo and therefore the VAT payment would only be made in April, after the VAT had gone up to 15%.
“I suggested that SANparks should absorb this 1% but was told that they are not a charity organisation! How many thousands of South African holidaymakers are affected by this?”SANParks chief financial officer Dumisani Dlamini said the organisation had a unique business model in the way that accommodation reservations are secured in national parks.
“After making reservations, guests are given a provisional reservation and, when their deposits are received, they are transferred to a liability account in SANParks’s accounting records and are not processed as revenue. 
“This is primarily because of the fact that many reservations are cancelled or amended before arrival date,” he said. “Even if the full value is paid as the deposit, which in most cases is required, the amount is still regarded as a deposit and processed accordingly.”
So VAT only becomes liable during the stay, Dlamini said. In order for SANParks “to execute its conservation mandate effectively” it had no choice to pass on the extra VAT to its guests for stays from April 1, he said.Asked why Adler was not told this when she confirmed in March that payment had been made in full – given that the VAT increase announcement was made in February – SANParks GM of strategic tourism services Joep Stevens said: “Regrettably there was a short window period between the announcement of the VAT increase and the update of VAT inclusive rates on the reservation system used by SANParks to reflect the 15% VAT, and we apologise to Ms Adler and other affected guests.
“We had very limited time to update the approximately 48,000 reservations that had deposits paid for stays beyond 1 April 2018. Rates on the system (VAT inclusive) for literally hundreds of products had to be updated.”
Fair enough, but Adler phoned SANParks in March specifically to check that she’d paid in full and was told she had – not a word was said about the VAT increase.I approached SARS for comment on this issue and was told by its VAT team that VAT works on “the time of supply”.
“The amount – whether part payment or full payment – will not be considered to be a supply until the time the amount you paid is used to actually pay for the services,” a spokesperson said.
“In this example, if SANparks considers the payment as deposit, then only when you start using their services is the amount recognised as payment for services rendered.”
Section 67 of the VAT Act allows vendors to recover the amount from the customer if there is an increase in the VAT rate, but they are not compelled to.
“They have the discretion to absorb the 1% VAT cost or to pass it on to the customer,” said SARS.
I’m hoping that most South African accommodation venues have hospitably chosen to absorb that 1% when it comes to payments made before April 1, and consider it quid pro quo for the interest they’ve earned.CONTACT WENDY
Email: consumer@knowler.co.za
Twitter: @wendyknowler

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