Value added tax

Teaching slides

1. Samkelo M agongo 153469 B.ED SECONDARY BUSSINESS STUDIES YEAR 4

2. VAT VALUE ADDED TAX

3. What is VAT? VAT is a consumption tax added to a product's sales price. It represents a tax on the "value added" to the product throughout its production process.

4. Objectives of VAT 1. To Increase Government Revenue The primary purpose of VAT is to raise revenue to meet public expenditure since most government activities are financed by taxation. - VAT develops a stable source of government revenue. 2. To Avoid Cascading Effect - VAT also aims to remove the cascading effect of taxes and levies, which is generally prevailing in other types and manner of levy. - A cascade effect is an inevitable and sometimes unforeseen chain of events due to an act affecting a system .

5. …continued 3. Transparency – VAT makes the tax system more transparent . This is to say that there is easy compliance and procedures through transparency. 4. To Reduce Tax Evasion Practices 5. To prevent distortion in trade and economy through uniform tax rates.

6. Advantages Compared to other indirect tax, VAT is easy to manage As VAT is a consumption tax, the revenue generated will be constant. For as long as there is consumption of goods and services, revenue from VAT will be constant Due to the catch up – effect of VAT, it minimizes avoidance

7. Disadvantages of VAT. As the VAT is based on full billing system, VAT implementation is expensive It is not easy to calculate the value added in each and every stage, thus VAT is difficult to understand. VAT is regressive in nature, thus affecting mostly the low income earners as they spend most proportion of their income

8. WHY V.A.T INCREASED IN SA? They wanted to finance there so called free tertiary Education. Also the government of South Africa wanted to increase grants by at least R100 per person

9. Why the proposed increase V.A.T in eSwatini ? eSwatini’s Economy is dependent on South Africa We import over 70% of our products from South Africa

10. For example goods subjected to VAT

11. Negative effects of an increase in V.A.T in Eswatini V.A.T is regressive tax, the poorest members of society may end up spending more of their income on V.A.T than the wealthiest. Inflation, higher V.A.T rates may lead to higher rates of inflation as cost of goods and services rises.

12. “The ANC cannot make the poor pay for their looting of public money ,and we will fight this increase in V.A.T on behalf of the poor and the unemployed” Mmusi Maimane