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- Link: https://dearsouthafrica.co.za/2026/02/27/my-budget-tip-for-the-minister-of-finance/
- Published: 2026-02-27T20:23:55+02:00
- Author: dearSA

![](https://cdn.dearsouthafrica.co.za/wp-content/uploads/2026/02/27202308/budgettip1-
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## MY BUDGET TIP FOR THE MINISTER OF FINANCE

Proposal: Adjustment of the VAT Registration Threshold from R1 million to R2 million

1.⁠ ⁠Historical Context and Inflationary Correction

The compulsory VAT registration threshold has remained stagnant at R1 million since
2009. Over the past 17 years, the purchasing power of the Rand has diminished significantly.
When adjusted for cumulative inflation, R1 million in 2009 is equivalent to over
R2.3 million in today’s terms. By maintaining the status quo, the Treasury is effectively
lowering the barrier for entry into the VAT system every year, capturing smaller
and more vulnerable businesses that the original 2009 legislation intended to protect.
A shift to R2 million is a vital correction to reflect current economic realities.

2.⁠ ⁠Protecting Thin Profit Margins

Small businesses operate in a highly competitive landscape where profit margins 
are often razor-thin. For a business turning over R1 million to R2 million annually,
the administrative and financial weight of VAT compliance is disproportionately 
high. When these businesses are forced to register, they face a “lose-lose” scenario:
raise prices and lose customers to informal competitors, or absorb the 15% cost 
and face insolvency. Lifting the threshold allows these SMMEs to remain price-competitive
while they stabilise.

3.⁠ ⁠Reducing the Administrative and Compliance Burden

VAT compliance is not just a financial cost; it is a massive productivity drain.
Small business owners are typically the primary operators, accountants, and administrators.
The complexity of VAT filing—and the severe penalties for clerical errors—diverts
essential focus away from growth and job creation. Increasing the threshold provides
a “regulatory breathing room,” allowing businesses to scale their internal systems
before taking on the complexities of the VAT net.

4.⁠ ⁠Preventing Business Failure and Supporting Job Creation

The “missing middle” of the South African economy—businesses attempting to transition
from micro-enterprises to sustainable firms—frequently collapse at the current R1
million turnover mark. The sudden jump in compliance requirements is often the primary
catalyst for failure. SMMEs are the backbone of employment in South Africa; by providing
this relief, the Treasury incentivises formalisation without the immediate threat
of administrative strangulation.

Conclusion:

In light of the high failure rate of small businesses and the nearly two decades
of inflationary erosion, I urge the Minister to adjust the VAT threshold to R2 million.
This is a practical, high-impact intervention that will safeguard the backbone of
our economy and encourage sustainable growth.

Sincerely,

Robert Hutchinson, founder, [DearSouthAfrica.co.za](http://dearsouthafrica.co.za/?fbclid=IwZXh0bgNhZW0CMTAAYnJpZBExbXhFRFRBMTBGYWF1Y2JTMnNydGMGYXBwX2lkEDIyMjAzOTE3ODgyMDA4OTIAAR61csIXjJwLhri3IepO5pJ_DrUrozXuDib0zvf9CoqKrY7mwLrafg_871NhrQ_aem_8taSGR-vjUch7e9053I7xQ)