Cape Chamber urges government to increase stagnant VAT threshold for struggling small businesses
The Cape Chamber of Commerce has called on the government to raise the Value Added Tax (VAT) registration threshold
Image: Itumeleng English/Independent Newspapers
The Cape Chamber of Commerce has called on the government to raise the Value Added Tax (VAT) registration threshold, which has remained at R1 million for 16 years.
In a statement released to the media on Thursday, Jacques Moolman, the Chamber’s president, said the 'outdated' threshold is putting extra pressure on small businesses, making it harder for them to grow and create jobs.
"Currently, businesses with taxable goods or services worth more than R1-million are obliged to register for VAT," Moolman said.
"But the cost of goods and services has more than doubled since this threshold was set, which in effect means the VAT net reaches deeper into the small business sector than it did before".
This call comes as small and medium-sized businesses across are facing ongoing challenges, with the latest Absa/SACCI Small Business Growth Index (SBGI) revealing troubling trends.
The report indicates that 52.8% of small, medium, and micro enterprises (SMMEs) are experiencing contraction, financial difficulties, or are at risk of closing, while nearly one in ten are on the verge of shutting down.
Moolman added that the current VAT registration threshold does not reflect the increase in prices over the past 16 years, effectively expanding the tax burden on small businesses.
Moolman said VAT registration and compliance impose an administrative cost burden on small businesses, shrinking the capital available to grow capacity.
"If government wants more tax revenue, it needs to create more jobs, not make conditions more difficult for job creation". The Cape Chamber shares recent concerns about this threshold stalemate and the negative effect it is surely having.
"By failing to amend the threshold in line with inflation, government is doing the economy a disservice – at a time when it urgently needs to support small business, as per its mandate".
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