Taxi operators in the Western Cape are calling on the government to scrap Value Added Tax (VAT) on purchases of new vehicles.
This they believe would make the prices of new vehicles affordable, as it would enable them to pay lower instalment and also benefit commuters with lower taxi fares.
Kurt Hendricks, Western Cape Department of Mobility, Deputy Director: Formalization & Empowerment, told TaxiWorld publication that taxi industry is worthy of government support.
Hendricks says he supports the proposal for VAT exemption as one of the ways the government can help taxi industry become sustainable and profitable.
“Taxi operators’ call for VAT exemption should be investigated further as it makes sense. For example, a 15% reduction in VAT
on the total costs of financing a taxi vehicle could enhance affordability by lowering vehicle repayments,” Hendricks said.
Taxi operators in most cases buy vehicles as individuals who are not VAT registered, hence they are unable to claim a refund for VAT.
To avoid fraud from claims by illegal taxi operators – the Provincial Regulatory Authority and local municipalities can play an important role in the prevention of fraudulent VAT claims by illegal taxi operators if the VAT proposal becomes a reality.
Mark Skriker, Head of Provincial Regulatory Entity in the Western Cape echoes: “Municipalities have an important role to play in assisting taxi industry including addressing challenges of registration and combatting illegal operations.
“There are taxi operators that are registered for VAT through their companies or CC entities that are able to claim for VAT.
However, the reality is that most taxi operators are unable to claim VAT refunds simply because they run their businesses as self-employed individuals on an informal basis as they don’t have necessary accounting books to substantiate their VAT claims,” added Hendricks.
Skriker said any initiative to support taxi operators is welcomed but cautioned that only “Parliament has authority to pass tax laws”.
