Digital tax will restrict consumer choice

Simon Leps, CEO of Fontera Digital Works, says that the new digital tax in South Africa will negatively affect consumer’s pockets and therefore restrict their freedom of choice.

The new electronic services regulations published by the South African Treasury, Electronic Services Regulations in January, will introduce 14% VAT on digital products and services, such as e-books, music and other digital goods, sold by foreign businesses.

The commencement date of the regulations is set for 1 June 2014.

According to Leps, this regulation will increase the cost of digital content.

“The new VAT law is knee jerk reaction to a small amount of local publishers who feel that they are unable to compete with pricing from overseas retailers.”

“The result will be that South African consumers’ pockets will be hit hard, especially with the rand recently hitting its lowest slump in five years.

“If VAT is added onto the purchase price of online goods from overseas it will increase the price by more than 50% thereby making the VAT on digital goods a double whammy,” Leps said.

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