Another Blow to the Google and Apple Online Stores in South Africa

daveza

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International clearance is immediate between banks.

Amazing - yet between two banks across the road from each other it takes a week.
 

DJ...

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If they can't pay VAT in SA like every other company here, then they can go ahead and refuse to do business with us.
They don't deserve special treatment

Apples and oranges. You've skipped a major point there by saying "like every other company here". They are not here. They do not derive tax benefits, and the SA government does not add value in their supply chain. These companies have no local presence or formal registration, because that requires significant capex and opex investment. If consumers choose to import form them, then that is their prerogative and government will get their duties imposed. There is no need for VAT, nor does it make sense...
 

Garson007

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Oh it is surely in reaction to the growing e-market. It would be foolish for any government to ignore it. I however think it's just natural progression - government being ten years behind the industry with legislation. I don't think there is an ulterior motive beyond there being services rendered without VAT out there.
 

saksakgp

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I'm lost

I thought VAT was a consumption tax. You get taxed for buying stuff and if you add value to what you have bought and then onsell it then you claim back the tax. Yes/No?
 

DJ...

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Amazing - yet between two banks across the road from each other it takes a week.

Interbank transfers are vastly different beasts to payments, particularly if you have an account specifically setup for international transfers...
 

LazyLion

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Oh it is surely in reaction to the growing e-market. It would be foolish for any government to ignore it. I however think it's just natural progression - government being ten years behind the industry with legislation. I don't think there is an ulterior motive beyond there being services rendered without VAT out there.

So you don't really understand how the tax system works. Gotcha.
 

DJ...

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I'm lost

I thought VAT was a consumption tax. You get taxed for buying stuff and if you add value to what you have bought and then onsell it then you claim back the tax. Yes/No?

For these companies there is no VAT claim, as at no point is SA necessarily involved in the supply chain. And while yes, it is a consumption tax, it is also on the basis of there being a value-add derived from the services of said country.

At the end of the day, the losers here are you, the consumer, and the company, as there is an overhead in managing this, and a fairly significant one now that you add currency and interest rate risk into the mix. It is ridiculous...
 

Garson007

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f consumers choose to import form them, then that is their prerogative and government will get their duties imposed.
Okay, but what duties are imposed on online purchases? Since the sale happens 'locally' I'm not importing anything, but data over a cable - just as I do by just browsing the web - so why shouldn't 'local' taxation be enforced?
 

JStrike

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OK, well I can see how sitting on a dust pile might be fun for you... you are only aware of Apple Stuff.
But to the rest of us that are aware of everything else in the world, we would like to have access to content... preferably legally and preferably cheap.

How am I only aware of Apple stuff?
 

saksakgp

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Alright. So if you buy something that originates in America or anywhere else and bring it into the country it should then be called an import and should be taxed accordingly
 

MagicDude4Eva

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I want to see how this will be implemented. In the US for example, online sales tax is only applicable if the company is incorporated in a state where online sales tax can be collected. You will therefore find that the majority of online businesses are incorporated in Delaware (or similar states) where online sales tax is not applicable. The same applies to Europe where most online businesses incorporate in tax havens such as Gibraltar, Cyprus, Luxemburg.

The EU is different whereas each Euorpean country has it's on VAT rate (i.e. UK 17,5%, Germany 19% or Austria 20%). Depending on the country in the EU there are certain VAT thresholds - so for example Austria's VAT threshold is EUR 100,000. This means that if I have a company in Austria, I will charge 20% VAT on sales until my foreign sales reach EUR 100,000 after which I would for example charge 17,5% VAT for UK sales and 19% VAT for sales to Germany.

VAT is really the preferred method of collecting tax, as there is an incentive to claim VAT back on your inputs (whereas with sales tax it's a tax you just have to pay over). I think charging VAT to overseas company will give a huge boost to online retail in South Africa. Most online retails position themselves so that they do not have to charge VAT/sales tax and therefore provide better pricing. The enforcement of VAT will either probably mean a price change with online retailers.

It will be short of a miracle if SA is able to implement this. Our biggest problem is that 150,000 (2.3%) tax-payers contribute 31% of tax-revenue and 3m (47.4%) contribute 5.6% to tax-revenue. Quite shocking to see that over 8m are not paying taxes (income too low - http://www.moneywebtax.co.za/moneywebtax/view/moneywebtax/en/page1504?oid=75795&sn=Detail&pid=1504)
 

DJ...

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Okay, but what duties are imposed on online purchases? Since the sale happens 'locally' I'm not importing anything, but data over a cable - just as I do by just browsing the web - so why shouldn't 'local' taxation be enforced?

Ah, no duties there, you are right. But now why tax it at all? No value was added in the process by, well, anyone. This is simply an opportunistic tax, as opposed to a rational one.

It poses some interesting questions though, for example if we were in the future able to simply replicate things remotely, how would we tax this and using what motivation and rationale?

It is the same as this argument as there is no physical product or service being exchanged. Unless one considers the IP to be an actual product in and of itself. Interesting ponderosities...:D
 

JStrike

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I want to see how this will be implemented. In the US for example, online sales tax is only applicable if the company is incorporated in a state where online sales tax can be collected. You will therefore find that the majority of online businesses are incorporated in Delaware (or similar states) where online sales tax is not applicable. The same applies to Europe where most online businesses incorporate in tax havens such as Gibraltar, Cyprus, Luxemburg.

The EU is different whereas each Euorpean country has it's on VAT rate (i.e. UK 17,5%, Germany 19% or Austria 20%). Depending on the country in the EU there are certain VAT thresholds - so for example Austria's VAT threshold is EUR 100,000. This means that if I have a company in Austria, I will charge 20% VAT on sales until my foreign sales reach EUR 100,000 after which I would for example charge 17,5% VAT for UK sales and 19% VAT for sales to Germany.

VAT is really the preferred method of collecting tax, as there is an incentive to claim VAT back on your inputs (whereas with sales tax it's a tax you just have to pay over). I think charging VAT to overseas company will give a huge boost to online retail in South Africa. Most online retails position themselves so that they do not have to charge VAT/sales tax and therefore provide better pricing. The enforcement of VAT will either probably mean a price change with online retailers.

It will be short of a miracle if SA is able to implement this. Our biggest problem is that 150,000 (2.3%) tax-payers contribute 31% of tax-revenue and 3m (47.4%) contribute 5.6% to tax-revenue. Quite shocking to see that over 8m are not paying taxes (income too low - http://www.moneywebtax.co.za/moneywebtax/view/moneywebtax/en/page1504?oid=75795&sn=Detail&pid=1504)

Sales Taxes in the US are based on the location of the customer
 

MagicDude4Eva

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Sales Taxes in the US are based on the location of the customer

I could be wrong, but it was my understanding that sales tax is imposed on the incorporation of the company and not the origin of the customer (at least that's how Amazon gets/got? around the tax issue in the states - i.e. sales and shipping occurs from tax-friendly states in the US such as Delaware). I am fairly confident that my EU VAT example is valid though - although I have no clue how the different tax authorities will collect VAT. I am sure it must be something like: Company A in Austria files VAT returns with Austrian tax authorities and Austrian tax-office claims back tax from other countries - must be quite some system involved to get this right....
 

saksakgp

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I don't see why this is a big deal. Company A sells a ebook for R100. With this VAT requirement they will have to sell the ebook for R114 and hand over R14 to Sars. That's consumption tax. If you don't consume but add value to the ebook and sell it to someone else then you can ask Sars to give you back your R14 because that someone else is now responsible for VAT
 

garp

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It's not fair for foreign companies to pay VAT as they cannot claim for, or apportion their input expenses and the value was not added in SA. And don't forget that it's essentially a withholding tax and that it is the company that is liable not the purchaser.
 

zippy

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Yeah....the same hurdles they face in Germany, France, Italy etc.
Must be tough on them

Dont know about Germany, France, Italy , but in the UK books carry a zero vat rate. In fact, newspapers and magazines as well.

but on ebooks there is vat. which is silly. Apparently, the UK wants to reduce vat on ebooks, but cant because of those nobheads in Brussels
 
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daveza

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So does this mean for example imports from Amazon will now have vat included in the purchase price AND we will still pay import duty ?
 
F

Fudzy

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So does this mean for example imports from Amazon will now have vat included in the purchase price AND we will still pay import duty ?

Physical items would remain unchanged I imagine. But who knows.
 

Franna

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What will happen when you buy a digital ebook new and resell it second-hand on gumtree. Must you then also register as a VAT dealer with SARS.
 
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