Sticky VAT Thresholds Hinder Small Business Growth and Create Economic Distortion

• The VAT registration threshold has been R1 million since 2009, causing economic distortion and affecting small business competitiveness.
• If adjusted for inflation, the threshold would be closer to R2 million.
• The threshold for monthly VAT returns has remained R30 million since 1991, which would be R200 million if adjusted for inflation.
• Small businesses crossing the VAT threshold become 15% more expensive, impacting their competitiveness.
• The policy in 2009 aimed to allow business growth without administrative burden.
• Experts call for engagement with National Treasury to determine a realistic threshold.
• The minimum threshold for voluntary VAT registration is R50,000, and R120,000 for commercial accommodation.
• A suggested registration threshold is R3 million to support business growth.
• VAT complexities increase costs for small businesses lacking expertise.
• VAT accounting impacts cash flow, as businesses must pay VAT to SARS upon invoicing, regardless of client payment.
• Economic distortion occurs when competitors stay below the threshold, affecting market fairness.

Source: moonstone.co.za

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

---

---