An amendment proposed in this year’s Taxation Laws Amendment Bill is opening the door for a change to the value-added tax (VAT) rate without a legislative change.

The proposed amendment says if the minister announces in the national budget that the VAT rate is to be altered, it will be effective from a date determined by the minister and apply for a period of 12 months. Parliament would decide whether to approve the change or not.

There is concern, however, that this would leave taxpayers in a precarious position as they wait to see whether MPs give the nod or not.

VAT was introduced in 1991 at a rate of 10% to replace the general sales tax. The rate was increased to 14% in 1993 and has remained unchanged since then.

Victor Terblanche, MD of tax consultancy VATit, says the proposed amendment is certainly aimed at empowering the minister to change the VAT rate on short notice.

"There are several factors that will have to be considered before announcing an increase in the current rate, especially if it is adjusted for 12 months, in which Parliament can approve or disapprove (the change)," he says.

Terblanche, who is also chairman of the South African Institute of Tax Professionals (SAIT), says such a change will present major financial and operational obstacles for registered VAT vendors.

They will need time to prepare changes to their accounting systems, changes to prices and pricing lists, time to alert clients to the change, there will be financial implications from implementation until the point of sales, and there will have to be acceptance of the change by the public, says Terblanche.

The amendment could also just be aimed at ensuring the act allows for a rate change if it becomes necessary, he says.

Nico Theron, partner at Tax Consulting, is concerned about legislative changes by announcement. "History shows that any proposal to change legislation by announcement is bound to be controversial and is likely to attract heated debate and harsh comments," he says.

"The legislature is of course by no means ignorant of the fact that changing legislation by announcement is unorthodox and appears to address this by still allowing intervention by Parliament."

Piet Nel, head of the technical tax division at SAIT, says the proposed amendment will certainly open the door to allow the VAT rate, among others, to be amended without having the changes promulgated.

However, this is not an indication that the rate will be changed in the near future.

Treasury has implemented tax changes for other taxes in the past before the changes were promulgated by Parliament — the most recent being the increase in the withholding tax on dividends, says Nel.

Theron says changes by announcement, which would still leave Parliament with the last say, will leave taxpayers with "tremendous uncertainty" as to whether or not Parliament will indeed corroborate the change made by the minister, and whether the change will survive the public consultation process.

"We accept that the minister will take such issues into account when setting a date for the application of the new rate and to allow Parliament and the legislative amendment process to run its course," he adds.

"It nevertheless begs the question — if Parliament is in any event going to have the final say, and rightly so, why allow the change to occur by announcement and not merely through the normal process?"

Treasury has invited public comment on the proposed amendments in the 2016 Draft Taxation Laws Amendment Bill. The deadline for comments is August 8.