NAG Online > News > PSA: Your games, taxed, from April 2014

PSA: Your games, taxed, from April 2014

Cat_Loves_Money

Attention all gamers, online media content consumers and anyone who buys anything on the net!

From 1st April 2014 (no, this isn’t a joke), government will begin taxing purchases made on the internet for digital or physical products under the new Electronic Services Regulations. There will be a 14% VAT levied on the purchase and anyone who makes products that fall under any of the categories outlined by treasury will have to add in 14% VAT from now on. If you’re purchasing games on Steam, consider buying them before the government tries to add VAT to your purchases. Hit the jump for more info.

Update: I have edited a section of this article to better explain how the new regulations affect consumers and overseas businesses. Although it appears that there may be a small financial incentive for businesses to register with SARS to pay VAT for their services rendered, it’s still a cost that will be passed on to us, the consumer.

The regulations that are coming into effect will be published soon by Finance Minister Pravin Gordhan for comment and may be altered before the proposed date if members of the public, private businesses and overseas brands make their case for changes to the regulations. Gordhan initially introduced the idea of adding VAT to purchases on the internet as government began to notice how much money swaps between overseas businesses and consumers on the net.

Note that if you’re already selling your wares on the net, you’re probably already adding VAT as local businesses are required by law to do so. This regulation change affects the purchase of products from overseas providers and may scare away some companies from web portals in South Africa.

In terms of the regulations, the additional VAT will also apply to any supplier of electronic services from an “export country” to any resident in South Africa, or where payment is made from a local bank. So those of you who use Amazon Web Services to host your website or run programs remotely, you’re going to have to add in a 14% increase every month to your bill.

What will be taxed? Here’s a brief list that covers the items that treasury is targeting.

Educational services

  • distance teaching programmes;
  • educational webcasts;
  • internet-based courses;
  • internet-based education programmes; or
  • webinars,

Games and games of chance

  • internet-based games, including any electronic game or multiplayer role-playing game;
  • interactive games, such as games of chance, where the result is influenced by the skill of the player;
  • electronic betting or wagering.

Information system services

Internet-based auction service

Maintenance services

Which refers to technical support relating to

  • blogs;
  • databases;
  • information systems;
  • information system services; and
  • websites.

Online content

  • e-books, which means any digitised content of any book or electronic publication;
  • films, which means any broadcast, documentary home-made video, live streaming performance, movie, music video, program, television series, or video
  • images, which means any desktop theme, photographic image, pictorial image, or screensaver,
  • music, which means any audio clip, broadcast jingle, live streaming performance, ringtone, song, or sound effect,
  • software, including apps, system software, or plugins, and any update to these programs.

Subscription services

Any subscription service to:

  • blogs;
  • databases;
  • information system services;
  • journals;
  • magazines;
  • newspapers;
  • games;
  • social networking services;
  • webcasts;
  • websites;
  • web applications; or
  • web series.

How does it affect you?

Simply, if you’re using anything on the net that you have to pay for, you’re going to have to pay more now. Do you pay for a World of Warcraft, Xbox Live Gold or PS Plus subscription? Do you buy anything on the Playstation store or on Xbox Live? Do you buy music on iTunes? Do you use Paypal for online purchases? All of the companies who render these services to you now have to register with SARS to pay VAT and claim it back like many tax payers already do. 

As a gamer who buys most of his games on sales and through Humble Bundle, this affects me quite a bit. If I were even to use Netflix in the future, I’d have to, under these regulations,  pay more for the use of Unotelly and Netflix because the legislation moves the onus on paying VAT to the supplier of these services, who will no doubt include it in their price hikes to make up for the loss. If they are able to, they can also claim back from SARS later on.

This is a move that will no doubt generate more cash for treasury and the ANC, but it will stifle the supply of services and content in the country early in while companies get their act together if they want to retain, or grow, their local presence. If Apple refuses to allow VAT onto their music and movie services, government could be in the right to bar them from doing any business here at all, unless they add it into their price and charge us, the consumer, for this. 

If you buy any digital services on the net, be prepared to pay more for them, or drop them completely in order to save more money. At the end of the day, this is money into the government’s pockets and once it’s there, there’s no telling where it goes. I hope that this starts a precedent for companies to open local branches in the country to render their services locally and help grow the economy, but who am I kidding? We’re a tiny blip on the international markets and it will be a long time before many companies consider this.

Source: MyBroadband

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  • kchan94

    This government in SA is being more corrupt than ever… (-_-“)

  • FanieNel

    And just like that the country is sinking even more. This will drive business away and hurt us a lot. Taking tax off our salaries, e-toll and now this. I’m seriously looking for jobs outside of SA because of all this crap. I refuse to accept this. Sadly this has become the norm here, government get all our money and we get barely enough to survive.

  • http://www.facebook.com/pages/Wesley-Fick/184346154999538 Wesley Fick

    Of course, this all assumes that government will actually be able to impose tax on any of these overseas companies. I’m not sure how they’ll even do it or record it.

  • http://www.facebook.com/pages/Wesley-Fick/184346154999538 Wesley Fick

    Of course, this all assumes that government will actually be able to impose tax on any of these overseas companies. I’m not sure how they’ll even do it or record it.

  • Pulseofthe Maggot

    I’m so sorry guys, but…

    FUCK

  • Marius Nell

    Dont the goverment realize they are messing with the people they always blame for anything violent?

  • Ben Myres

    Hey so thanks for bringing this to everyone’s attention :). However, over on MGSA: http://www.makegamessa.com/discussion/1606#Item_3, our resident lawyer, Nick Hall points out that digital services have actually always been liable to tax – just the new legislation shifts the responsibility over to the seller.

    It won’t really scare away international customers or services either as most of them will be US or EU – they already have domestic tax that they’ve had to deal with.

    So it’s shit that we have to pay more money, but it is not going to scare away anyone internationally anytime soon.

    • http://www.facebook.com/pages/Wesley-Fick/184346154999538 Wesley Fick

      Thanks for that, I see Nick says that indies will be protected if they sell through a portal like Steam or GOG, so that’s good news. Still, I’ll be more out of pocket this year thanks to the changes. It sucks.

      • Ben Myres

        Yeah agreed :/.

  • Jordan

    What bullshit. This is essentially taxing something that doesn’t exist (technically), and costs them [The Govt.] absolutely nothing. I can’t believe they’ve sunk this low.

  • Alex Rowley

    Is steam going to be affected by this? I really don’t see how they can impose it on Valve really.

    • http://wogan.me Wogan

      Simple: Force ISPs to block access on the grounds that they’re aiding tax evasion from non-compliant vendors. ISPs might put up a fight when it comes to giving up IP addresses for the odd torrent users, but when faced with a hectic penalty and/or criminal judgement, they’ll roll over pretty fast.

      • Alex Rowley

        Blocking IPs will cause quite a controversy, especially if it blocks services like steam where people already have massive libraries of games already bought on them. Also if they really do want to go the whole blocking them because of tax evasion then they should also do it to Google who really are basically evading tax.

        • http://wogan.me Wogan

          Controversy? *points at eTolls*

          • Alex Rowley

            Heh yea should have added to end that it’s not like they would actually care. This being the internet though I’m guessing there will always be a way around what ever barriers they put up. Proxy servers and all that.

  • XCal1bur

    14% ? That is daylight robbery if you ask me.
    Anybody up for creating a petition to get this overturned?

  • BinaryMind

    sigh… this is disgusting

  • Felix101

    They can’t even enforce e-tolls properly how on earth are they going to enfore THIS on ALL of the online buying services. Doesn’t seem possible. Just government trying to reach deeper into our pockets so the premiers can drive shinny new mercs. No thanks.

  • http://osu.ppy.sh/u/372964 Seth-Rah
  • Mayibuye Magwaza

    At the risk of being crucified, I’m going to step up here and support this.

    I see no reason that digital sales should be exempt from the usual taxes. We pay VAT on almost everything. Why should luxury goods (let’s not kid ourselves, Steam games are a luxury) receive an exemption? It just seems that people are annoyed because their hobby is being taxed, not because there’s a deeper principle that should be applied here.

    If I’m wrong, please show me how.

    • http://wogan.me Wogan

      Taxes exist to fund the government, who should then use that money to deliver public services, infrastructure, and so on. I would also have no problem on a 14% digital import tax – if all of that revenue was reinvested into the local digital economy, to build better infrastructure and subsidize local digital startups, then it’s all good.

      Except, that’s most likely not going to happen. Whatever the revenue is, it’ll be dumped into the rest of the national budget. Telkom and SABC will continue to struggle under inept leadership, our contention ratios will only increase, and in the end we’ll see no real benefit from this tax.

      • Mayibuye Magwaza

        Ah, but you don’t get to make decisions about where tax money should go. That’s what the budget process and Treasury are for.

        You can’t insist that your digital taxes should subsidize digital business, any more than you’re able to insist that the VAT that you pay on a block of cheese at Pick N Pay should be ring fenced for supporting the local dairy and cheese industry. Pacifists still have to pay taxes to fund the military, and vegans still pay money that ends up supporting the beef and dairy industry.

        If you don’t like the current government policies you can vote for someone else. Convince enough people to do the same and you can get your reforms. Not paying tax is just cheating the system.

        • http://wogan.me Wogan

          Actually, yes, we can insist. The point of a democratic government is that it obeys the wishes of the majority of it’s constituents. If every internet user in SA petitioned to have the full proceeds of this new tax allocated to the initiatives to support broadband development, and no reasonable counterargument can be presented, then the government has to do that. If they can just shrug it off, then we have a malfunctioning government, and a much bigger problem than a 14% tax.

          You also can’t compare governments and private enterprises in that way. Governments are supposed to be transparent, flexible, and responsive to the needs of the populace. Ironically, I think some private enterprises do a better job of this.

          • Mayibuye Magwaza

            “If every internet user in SA petitioned to have the full proceeds of
            this new tax allocated to the initiatives to support broadband
            development, and no reasonable counterargument can be presented, then
            the government has to do that.”

            Firstly, let’s not conflate ‘internet users’ with ‘the majority of the population’. I’d be surprised if a majority of South Africans actually access the Internet regularly, and I’d be extremely surprised if the majority of South Africans would in fact be affected by this tax.

            If you’re trying to argue that the majority of Group X (where X means people affected by a tax) are entitled to decide how that tax money should be spent, then you’re still wrong. Even if all the platinum companies turn around and said “hey, we think you should spend all the taxes on platinum mining exclusively on subsidizing our infrastructure”, government would be entitled to do otherwise, if it saw fit. It’s only when you have a national majority that the government is obliged to change, and such a national majority would have to express such a sentiment via the ballot box.

            Personally, I see no real argument for ring fencing this tax. Why shouldn’t some of the money from your Steam sale tax go to social grants or the SANDF or new police vehicles or the Public Protector’s office or any of the other myriad functions of government?

            Finally, I don’t really see how I’m comparing private companies and government.

            “Governments are supposed to be transparent, flexible, and responsive to the needs of the populace.”

            I entirely agree. However, there’s a difference between being responsive to the needs of the populace, and simply accepting the petitions of every special interest group – which is effectively what we have here.

          • http://wogan.me Wogan

            The majority of South Africans don’t access the internet? Are you sure? Granted, there are only a few hundred thousand ADSL subscribers, a few million 3G subscribers, a mobile penetration rate of something like 99% nationally, and millions of people using libraries, internet cafe’s and office internet access. Despite all of that, the government’s agenda for internet access is to provide broadband to every person in the country by 20-whatever. So even if not every single South African uses the internet now, the government is working towards a future where that is true.

            I’m also quite surprised that you consider internet users a ‘special interest group’. Would you also classify people that need healthcare and education, as special interest groups? Internet access has become all but a basic human right in some parts of the world – it’s become synonymous with communication, sharing, and freedom of speech and trade. That’s hardly ‘special interest group’ criteria.

            The main reason I’m arguing that this tax should support the digital economy, is because that initiative is already under-funded. Not enough is being allocated as it currently stands, and if this is a new source of revenue, then it only makes sense to plough it back into the infrastructure so you can earn more in the long term. That’s why Education is the biggest budget line item – in the long run, government investment in building an educated workforce will pay back dividends to the economy, and to the government itself. I don’t see why broadband shouldn’t be up there too, as a budget priority.

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