New VAT could hurt e-learning for SA

2014-03-03 14:29
Kindle e-reader. (Duncan Alfreds, News24)

Kindle e-reader. (Duncan Alfreds, News24)

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Cape Town - The local taxation on international e-books and digital products could harm the ability of South Africans to compete internationally, an e-learning specialist has said.

The government announced recently that it intended implementing new regulations for VAT on the purchase of international digital products, saying these would bring the purchase of these products inline with local parity.

The treasury department published a document calling for public comment for its proposed regulation of digital services.

"The net result is that the local consumers can buy imported digital products without paying VAT. This outcome not only places local suppliers of digital services at a competitive disadvantage (compared to suppliers from abroad) but also results in a loss of revenue for the fiscus," the document says.

While the higher pricing of international products may be a boost for South African business, the regulations also had the potential hurt the local educational publishing industry.

Specialist activity

"On the other hand, the South African publishing industry might not be able to supply all the required e-textbooks when it comes to niche markets, there will also be titles which are not produced in South Africa at all," Marc Vlietstra, e-learning specialist at The Training Room Online told News24.

Given that education is a specialist activity, content may not always be available locally and the regulations may negatively affect locals who wish to conduct their online studies.

"It isn't always viable to make an adaptation of an ‘international’ textbook, so this is where the international publishing industry would supplement the South African market. Having a tax barrier might result in South Africa being omitted when assessing investment opportunities and markets," Vlietstra said.

The implication of the proposed regulations could mean that international digital vendors would have to register to pay VAT and that cost would be passed on to the consumer.

However, it is unclear how the government will ensure that international vendors are brought into the VAT regimen and what if any penalties could be extracted from consumers who purchase from international platforms.

Vlietstra argued that local publishers were generally better placed to produce educational e-books.

Indeed, Van Schaik Bookstores in 2013 were one of the first publishers to launch e-textbooks for university students.

No tax relief

The company's offering was on par with traditional textbooks, though the product was different.

"The price of these e-books are not always on par with the print book prices. Most of the e-books we currently sell are cheaper than the print versions; some are on par and some are more expensive than the print equivalent. An e-book is a different product than a print book as it has some unique functionality that is not available in print books," Melvin Kaabwe, digital manager of Van Schaik Bookstores told News24 at the time.

"Locally produced digital learning solutions cater specifically to the South African market. This reflects not only in the textbook content and the alignment with the Department of Education requirements, but also reflects on requirements on a technological level," said Vlietstra.

In its current form the Electronic Services Regulations exclude tax relief for educational purchases. The regulations make specific mention of e-books and education.

"These imported services will include the supply of e-books, e-music, e-films, software, images, games and games of chance, information system services, internet-based auction services; maintenance services, educational services, and the supply of an internet-based auction service facility," the document says.


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