VAT U-turn: How businesses felt the brunt of political roulette

The Citizen

24-04-2025

The decision to scrap the 0.5% VAT increase has forced businesses to abandon costly plans to prepare customers.
The government's reversal of a decision to increase Value-Added Tax (VAT) has left businesses scrambling.
Communication from financial service providers preparing customer for the 0.5% increase from 1 May appeared on mobile phones across the country in the days following the vote on the fiscal framework earlier this month.
The 11th hour revocation of the hike has now forced service providers to amend pending bills and product pricing.
Resetting of increase plans
As politicians fought for the limelight to take credit for the decision to scrap the increase, business owners have counted wasted income.
'The compliance readiness came at huge costs, and costs will now be further incurred to implement National Treasury's reversal of the VAT increase,' Consumer Goods Council of South Africa (CGCSA) CEO Zinhle Tyikwe said.
Large corporates have needed to ramp up human resource capacity to revert their systems to pre-budget fiasco settings.
'While the sudden reversal does impact Discovery's internal processes, our systems and communications teams are working hard to ensure the necessary changes are implemented,' Discovery's media team told The Citizen.
Added stress was placed on consumers too, as they were forced to look at their own budgets, but those increases are likely to now be reversed.
'There will be no increase to any fees and charges. We are currently implementing the VAT change roll-back on our systems and due care is being taken to attend to all technical changes so that there is no impact to any fees,' Nedbank assure The Citizen.
'Any discrepancies that may inadvertently arise will be rectified accordingly,' they added.
Zero-rated product list expansion gone
The easier the transaction, the easier it will be to adjust, as illustrated by convener of the National Liquor Traders Council, Lucky Ntimane.
'Given the simplicity of our operations as it pertains to point of sale, the reversal of VAT will not impact our business systems at all,' Ntimane replied to The Citizen.
'Without a doubt the increase would have affected our businesses because we were going to have to bear with the above inflation excise increases as well as VAT. So we welcome this new development,' he said.
However, large grocery retailers went as far as putting together national project teams to deal with the VAT increase, efforts that will be put on ice.
'We are relieved that this will afford our shoppers and South Africans in general a financial sigh of relief,' Gerhard Ackermann, National Merchandise Executive at The SPAR Group said.
'Following these developments, we are ensuring that our customers are not inconvenienced by placing the proper financial controls in place for smooth customer continuity,' he assured.
While politicians proselyted about saving the poor, Tyikwe lamented how the expansion of the basket of zero-rated VAT products had also fallen away.
'South Africans are hard hit by the cost of living and the zero-rating of the additional products would have gone a long way to not only cushion consumers but also improve healthy eating and healthy lifestyles,' Tyikwe stated.
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